A Charmer in Berkeley

Posted on March 21st, 2018 in Real Estate | No Comments »

In the bucolic enclave of North Berkeley sits a 1922 humble abode the recently benefited from a gentle yet modern makeover.

Coming in at two beds and one bath, 1534 Edith features period window casings, fireplace, and hardwood floors repainted in designer neutral tones with white trim. The arched windows are especially delightful.

By Brock Keeling @ SF.Curb

Bay Area home prices continue to rise in record streak

Posted on February 28th, 2018 in Real Estate | No Comments »

Richard Rogers looks at the kitchen at an open house at 5893 Taormino Avenue in San Jose, Calif. on Sunday, Feb. 25, 2018. (Randy Vazquez/ Bay Area News Group)

Bay Area housing demand and prices continued a record-setting streak in January, as aggressive buyers pushed up year-over-year median sale prices for the 70th straight month.

A deepening shortage of homes for sale in the region drove up bidding for scarce supply. The median home price in the region rose to $710,000 in January, up from the median price of $628,000 a year ago, according to a report released Wednesday by real estate data firm CoreLogic.

Over the last six months, median home prices in the nine-county region have gained an average of 12.6 percent from the previous year.

But rising prices also meant a drop in home sales, particularly in entry-level units. The 4,884 home purchases last month represented a dip of nearly 8 percent from last year and the lowest January sales mark since 2008, according to CoreLogic.

CoreLogic research analyst Andrew LePage said the drop “has a lot to do with the continuing mismatch between housing supply and demand, especially in the lower price ranges.”

By Louis Hanse, Bay Area News Group

Quick move higher in interest rates could be warning for 2018

Posted on December 19th, 2017 in Interest Rate | No Comments »

Markets will be watching to see if interest rates continue to climb Wednesday, as the tax bill makes its way through Congress.

The stock market’s tax party took a breather Tuesday, just as Treasury yields snapped higher.

While not many traders were tying the two moves, the markets will be watching those yields again Wednesday, with concern that the volatile year-end streak higher is a sign of what could be ahead for 2018. The Dow slipped 37 points to 24,754, while the S&P 500 lost 8 points to 2,681.

The 10-year Treasury yield touched 2.47 percent Tuesday. While it was at that same level in October, the move had an unexpected ferocity, gaining more than 11 basis points in two days in one of the biggest such moves this year. The 2-year note yield was also as high as 1.87 percent, before trading at 1.85 percent.

“It kind of started [Monday] out of nowhere,” said Peter Boockvar, chief market analyst at Lindsey Group. “I’ve been noticing upticks in inflation expectations.” He also said investors may be considering that the tax package, expected to be approved by both the Senate and House by Wednesday, could result in more economic growth but also a bigger deficit, two things that could drive yields higher.

Boockvar said the stock market could have been moving lower on a ‘sell the news’ reaction to the congressional votes on taxes. The House passed a bill, but because of a procedural glitch, the body will have to vote again Wednesday.

Bond strategists said Treasury yields were also responding to rising yields in Europe on Tuesday, after Germany expanded the amount of debt it will issue next year. That drove bund yields higher, and Treasury yields also rose, breaking some key technical levels in the process. Yields move inversely to price.

Treasury strategists say they expect to see volatile trading as investors make year end moves end in a very illiquid trading environment. But Boockvar said the market may be anticipating less easing by the world’s central bankers in the new year.

“That will be the thing to keep in mind all through 2018. Trump and tax reform dominated 2017. Central banks and their removal of accommodation will dominate 2018,” he said. Boockvar said the Fed in January begins to pare back another $10 billion of its bond purchases, bringing the total decline in purchases to $20 billion a month. He added that the European Central Bank is also cutting its $70 billion in monthly bond purchases in half.

“There’s $55 billion less liquidity from December to January,” he said. “I think it matters. There’s going to be $1 trillion less liquidity in 2018.” The Fed’s reduced purchases of what are mostly Treasurys is expected as the U.S. is expected to increase debt issuance.

Michael Schumacher, head of rate strategy at Wells Fargo, said trading could continue to be volatile into the year end, but he does not expect a sharp move higher in yields next year. His target for 10-year in 2018 is 2.95 percent.

“You’ve got two big changes on Jan. 1 and it’s a cumulative thing,” he said of the reduced central bank asset purchases. “I don’t think it’s a light switch kind of thing. This is the first year in a while the Fed has delivered on the dots. So it’s got the market nervous about the Fed coming through again next year. ”

The Fed forecasts three interest rate hikes for 2018, and it presents its forecast on a chart with anonymous ‘dots’ on a timeline to represent each individual official’s view.

“The Fed’s got three hikes for next year. The market’s got two. I think people have too comfortable a view about Jerome Powell’s stance on monetary policy. There’s a lot we don’t know about him yet. The idea that he’s a clone of Janet Yellen is too simplistic,” he said. Powell takes over from Yellen in February.

Bob Sinche, global strategist at Amherst Pierpont, points out that the Treasury market has made curious moves at this time of year in the past, like 2016 when the 10-year note contract reached its low of the year on Dec. 21.

Note contract reached its 2016 low on December 21, followed by an irregular rally over the following 9 months, so important moves in late December are not unprecedented.

“A break lower in price, if sustained through the week, would be interesting as the key PCE deflator report is out Friday. So while this could be a false break, significant fiscal stimulus, 3 plus percent real GDP growth, a market that appears to be underestimating Fed hikes next year and the increasing net supply as the Fed ramps up balance sheet reductions certainly appears to be a recipe for higher yields,” he wrote. The PCE deflator is the Fed’s preferred measure of inflation.

The markets have been concerned about a “flattening” in the Treasury curve, where long end yields were moving closer to the short end, which was rising in anticipation of Fed rate hikes. Investors keep an eye on that trend since a flat curve can signal economic trouble ahead, and if it inverts, it would be taken as a recession warning. But that trend relaxed Tuesday as yields on the long end moved higher.

Brian Levitt, senior investment strategist at OppenheimerFunds, said he does not see a problem with the curve flattening for now, but it could be if the Federal Reserve tightens policy too much. That is his big worry for stocks, which he expects will have a positive 2018, but with a more normal 10 to 12 percent correction, after barely a sell off in 2017.

“All cycles are going to end with too tight a policy in one of the major economies of the world,” he said.

Levitt said he doesn’t believe the tax bill has been the big driver of stocks, which he says have been benefiting from synchronized global growth.

“I worried maybe the tax law becomes a little bit of a sugar rush to the economy, but not enough investment in productive assets to make it sustainable,” he said. He said he expects businesses to make some investment but much of their savings will go to dividends and buybacks.

“If you bring forward a little of the growth, the Fed could become more aggressive and paradoxically it could shorten the cycle,” he said.

Existing home sales data is expected at 10 a.m. ET Wednesday, after Tuesday’s new home sales rose more than expected. Earnings are also expected from General Mills, Blackberry, Winnebago, Bed Bath and Beyond and Herman Miller.

Patti Domm, CNBC

Renting is better than owning to build wealth — if you’re disciplined to invest as well

Posted on November 18th, 2017 in Real Estate | No Comments »

Millennials, take note: If you’re looking to build up your nest egg, home ownership isn’t really all it’s cracked up to be. In fact, a new study published on Thursday shows that renting may very well be the best way to go about it.

The numbers, crunched by Florida Atlantic University, Florida International University and the University of Wyoming, determined that the property appreciation most homeowners expect doesn’t necessarily stack up in terms of wealth building.

Hence, FAU economist and co-author of the study Ken Johnson says that while the American Dream is alive and well, it needs a revision.

“When considering buying and building wealth through equity appreciation versus renting and reinvesting in a portfolio of stocks and bonds, property appreciation does not change the results,” he said. “On average, renting and reinvesting wins in terms of wealth creation regardless of property appreciation, because property appreciation is highly correlated with gains in the traditional financial asset classes of stocks and bonds.”

Shawn Langlois at Marketwatch

Gary Cohn: ‘People don’t buy homes because of the mortgage deduction’—or do they?

Posted on September 29th, 2017 in Real Estate | No Comments »

In the midst of the mad selling and explaining and quantifying and qualifying of potentially the biggest U.S. tax overhaul in decades, President Donald Trump’s chief economic advisor stood at a White House podium and made a bold declaration: “People don’t buy homes because of the mortgage deduction.”

He said that, even though members of the Trump administration have repeatedly said they will “protect” the popular tax break.

There are a lot of reasons people buy homes—financial, practical and emotional. For the vast majority of those who make that choice, it is by far their single largest investment. Until the financial crisis, the common belief was the home prices always rise, and a home was therefore a proven way to build wealth, but that was proven wrong.

More than 6.5 million homeowners lost their homes to foreclosure in the past 10 years, according to Attom Data Solutions, and 2.8 million current homeowners still owe more on their mortgages than their properties are worth. This after home prices plummeted nationally for the first time since the Great Depression.

Most consumers, at least according to several recent surveys, still believe that a home is a good investment. The majority of renters still aspire to home ownership, despite the fact that millennials have been deemed the “renter generation.” That designation is likely more due to high student loan debt and lower initial employment for this generation than anything else. Millennials have also been slower to marry and have children, which are the primary drivers of homeownership.

“I think people buy homes because it represents security and a way to build wealth and a sense of stability,” said Laurie Goodman, co-director of the Housing Finance Policy Center at the Urban Institute. “I don’t think the mortgage interest deduction plays a large role in that decision.”

For a great many homeowners, the deduction isn’t even a financial factor. A taxpayer can only take the deduction if he or she itemizes, and just one third of taxpayers itemize, but about 64 percent of Americans own a home (and just over one third of homeowners have no mortgage). Three quarters of those who do itemize take the deduction, but if the standard deduction were raised, fewer taxpayers would itemize, and therefore the mortgage deduction would be used even less.

“Gary Cohn is probably right about that,” said Richard Green, director and chair of University of Southern California’s Lusk Center for Real Estate. “It does absolutely encourage people to buy bigger houses than they would, but does it flip the switch between buying and renting?— maybe half a percent in home ownership, very little.”

Green notes that the deduction is most important to those living in states like California, which has both high tax rates and high home prices. Home prices there, he said, could drop without the deduction. As for overall homeownership, he points to other nation’s like Canada and Australia, which have no mortgage deduction but have very high homeownership rates.

The National Association of Realtors, one of the most powerful lobbying organizations in Washington, vehemently opposes any change to the deduction. Even though there has been no change so far, they came out against the current plan, claiming that because it would result in fewer taxpayers itemizing, it would weaken the power of the deduction.

“This proposal recommends a backdoor elimination of the mortgage interest deduction for all but the top 5 percent who would still itemize their deductions,” wrote NAR president William Brown in a release. “When combined with the elimination of the state and local tax deduction, these efforts represent a tax increase on millions of middle-class homeowners.”

By CNBC Diana Olick

 

How tax reform could hit charitable giving

Posted on August 6th, 2017 in Economy | No Comments »

Plenty of factors can motivate charitable giving: Moral obligation, religious tithing, a desire to improve the world or leave a legacy.
But another factor — the tax benefits for giving — could soon change if lawmakers push through tax reform.
Few people donate simply because of the tax breaks and are unlikely to stop giving altogether if they don’t get any. But analyses from the Congressional Budget Office and others have found that tax incentives typically increase how much you choose to donate — whether in life or at death.
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That’s why Republican proposals to reduce or eliminate key tax breaks for giving has charity experts a little concerned. Specifically, President Trump and House Republicans have proposed to nearly double the standard deduction, lower income tax rates and repeal the estate tax.
Though it’s assumed the charitable deduction would remain in place, increasing the standard deduction would mean far fewer people would itemize and be able to claim the break, while lowering tax rates would make the deduction worth less for those who still take it.
Related: The deductions that could be killed by tax reform
The double whammy of doubling the standard deduction while lowering the top rate to 35% from 39.6% could reduce giving by between $5 billion and $13 billion a year, or up to 4.6%, according to a recent study by the Lilly Family School of Philanthropy at Indiana University.
Of those two changes, increasing the standard deduction has the greatest negative effect because it would reduce those who itemize to just 5% of filers, down from 30% today. That’s because the only reason to itemize is if your deductions combined exceed the value of the standard deduction.
“The 25% who used to itemize will probably give some but not as much,” said David Thompson, vice president of policy at the National Council of Nonprofits.
How much does it save
Here’s how the charitable deduction works:
If you itemize deductions, how much you save in taxes from your contributions is determined by your top income tax rate. If, for example, you’re in the 28% bracket, you’ll save $28 in taxes for every $100 you donate.
And if you are fortunate enough to have an estate worth more than $5.5 million (or $11 million for married couples), anything above those amounts would be subject to the federal estate tax after you die. Whatever you give in your lifetime or bequeath to your heirs upon death can reduce that taxable portion.
Related: The most controversial tax reform proposal has been nixed
Many charity groups have urged lawmakers to make the charitable deduction “universal” — meaning everyone can take it whether they itemize or not. “Our nation has a rich history of charitable giving. By making it a universal deduction we think that it recognizes this important value,” said Sean Parnell of The Philanthropy Roundtable.

By Jeanne S @ CNN Money

This Bay Area city is surprise No. 1 in hottest U.S. housing markets

Posted on June 29th, 2017 in House | No Comments »

This Lafayette home is listed at $5.69 million. It has six bedrooms and six and a half bathrooms. (Pacific Union International)

A new real estate “Hotness Index” is loaded with Bay Area housing markets, which is only to be expected.

Less expected is this: the Vallejo-Fairfield market in Solano County is the No. 1 “hottest” in the nation. Vallejo, a city whose reputation has been tarnished through the years by news reports about crime and gangs, has established itself as a hot housing destination, according to the June index from realtor.com.

Last month’s sale price for a single-family home in Vallejo was $365,000 and properties are moving quickly.

“Something’s on the market, and you look at the map and see we’re about the cheapest place in the Bay, with a fast commute to the city,” said Ron Gold, a Vallejo-based agent with the Re/Max Gold real estate franchise. “If you want something cheaper, you’d have to go to Stockton.”

People are going there, too. The index ranks the Stockton-Lodi area as the 14th hottest market in the U.S.

The monthly index measures where houses are selling the fastest — they’re typically gone within 31 days in Vallejo-Fairfield — as well as which markets are generating the most listing views on realtor.com.

Beyond that, the index has become a reflection of the Bay Area’s housing crisis, which is pushing commuters to purchase homes at relatively affordable prices in out-of-the-way places.

Yes, the San Francisco-Oakland-Hayward metropolitan area is the No. 2 “hottest” in the country, and San Jose-Sunnyvale-Santa Clara is No. 9 on the list.

But then there is the Sacramento-Roseville-Arden-Arcade metro area (No. 4) and Santa Rosa (No. 17). Yuba City – in Sutter County, about 40 miles north of Sacramento — is the nation’s 19th hottest market, and Modesto is No. 20.

Realtor.com reports that “there were 11 percent fewer homes on the market (nationally) in June 2017 than during the same time last year, marking 24 consecutive months of year-over-year inventory declines.”

Javier Vivas, realtor.com’s manager of economic research, added that “more markets than ever are struggling with inventory problems; in 80 percent of markets there are fewer homes for sale currently than this time last year.”

Given that the housing supply is at historically low levels in much of the Bay Area — where the job force keeps growing along with buyers’ demands for homes — it isn’t so surprising that the march of gentrification is reaching Vallejo, Stockton and Yuba City.

“We always make the 10 o’clock news for some reason, going back to the 1980s,” said Gold, the agent in Vallejo, “but we’re not really a whole lot different from other communities.”

In 1998, he bought his own house for $125,000: a modest place, just 1,300 square feet. He since has more than doubled its size, turning it into a custom home with granite counters and a three-car garage. He figures it’s now worth between $600,000 and $700,000.

About 25 miles to the south, Pacific Union agent Carla Buffington has watched as more and more upscale homeowners move to West Oakland and the Berkeley Flats, both previously deemed affordable, though not so much anymore.

“There’s just a lot of crazy sales, ” she said. “You just go, `Oh my gosh. Who pays that for that?’”

This year in the Flats, she said, four homes have sold for more than $1 million.

“They’re these transitioning areas and they’re close to the city,” she said. “You can fly over the Bay Bridge, and people are looking at it and saying, `Well, I can afford a lot more here than I can in the city.’ If you have a million dollars and you can’t get a three-bed, two-bath in what’s considered a little bit nicer neighborhood, you get pushed.”

By Richard S – Bay Area News Corp.,

NAR Midyear Forecast: Existing-Home Sales Poised to Climb 3.5 Percent in 2017

Posted on May 19th, 2017 in Real Estate | No Comments »

The multi-year stretch of robust job gains along with improving household confidence are expected to guide existing-home sales to a decade high in 2017, but supply and affordability headwinds and modest economic growth are holding back sales and threatening to keep the nation’s low homeownership rate subdued. That’s according to speakers at a residential real estate forum here at the 2017 REALTORS® Legislative Meetings & Trade Expo.

Lawrence Yun, chief economist of the National Association of Realtors®, presented his 2017 midyear forecast and was joined onstage by Jonathan Spader, senior research associate at the Joint Center for Housing Studies at Harvard University, and Mark Calabria, chief economist and assistant to Vice President Mike Pence. Spader’s presentation addressed past and projected movements in the homeownership rate, and Calabria dove into why reversing weak productivity and the low labor force participation rate are necessary to boost the economy.

By the National Association of Realtors

Soulcycle coming to Los Gatos

Posted on April 7th, 2017 in New Store | No Comments »

a boutique fitness phenomenon that took New York City by storm in 2006, is opening its inaugural South Bay studio in Los Gatos.

A woman-owned business, SoulCycle is transforming the relationship people have with exercise. Rather than simply a room filled with people on stationary bikes pumping away, every SoulCycle studio is uniquely inspiring, each instructor uplifting and every class involves both the body and the mind to achieve the ideal workout. SoulCycle is about creating a community environment where people come together to enjoy an “efficient, joyful experience.”

An alternative to a typical spin “workout,” SoulCycle begins in the calming, candlelit studio space. Each class is 45 minutes in length and is a full body experience, incorporating core exercises and hand weights to build upper body strength. Riders of all ages and fitness levels move in choreographed union to energizing music, creating a meditative-like atmosphere that is designed to clear the mind and enable participants to “connect with their best selves.” According to their website, “SoulCycle doesn’t just change bodies, it changes lives. With inspirational instructors, candlelight, epic spaces, and rocking music, riders can let loose, clear their heads and empower themselves with strength that lasts beyond the studio walls.”

SoulCycle has a cult-like following that began with its initial Manhattan studio. The boutique studio expanded to the Bay Area in 2013 including a location in Palo Alto’s Stanford Shopping Center. The SoulGATO studio is their first in the South Bay. Located at 212 Santa Cruz Avenue, the facility will include 58 bikes and classes will cost about $30 apiece. Because the SoulCycle experience is an immersive one, the mood of the studio is paramount and the SoulGATO studio promises to be a “community cardio party” that will invigorative as well as provide meditative benefits. For those new to the SoulCycle experience, here are some guidelines to prepare for your first soul experience.

The largest indoor cycling company in the country, SoulCycle currently has 62 studios nationwide in New York, Miami, Boston, Dallas, Washington DC, Southern California and the Bay Area, with plans to expand to 250 locations. Cyclebar is their largest competitor and they, too, have designs on opening in Los Gatos in the not too distant future.

Why US Growth is anemic

Posted on February 28th, 2017 in Economy | No Comments »

The longtime chief of J.P. Morgan Chase thinks that he has a clear view of what’s been holding back the U.S. economy over the past seven years.

“Ourselves! Our policies!” intoned Jamie Dimon during a question-and-answer session at a conference for investors hosted by J.P. Morgan Chase & Co. JPM, +0.21% on Tuesday in New York. Dimon pointed to toughened regulations against the financial system in the wake of the 2008-09 financial crisis and deadlocks that resulted in sequestrations, or across-the-board government spending cuts, as some of the headwinds that the U.S. economy has faced over the past several years.

“Those things hold back growth,” Dimon said. “Even regulatory policy sucked up a lot of bank lending capabilities that sucked up growth,” he said, echoing the common refrain from critics that tight regulations against the U.S.’s largest financial institutions has hampered the economy.

By Mark DeCambre at www.marketwatch.com