All about Life & Real Estate in Silicon Valley – Broker Michael Koo's Blog.

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

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

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 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.,

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

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.

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

Depending on whom you ask, U.S. Treasurys are either headed for a dramatic selloff, or a dynamic rally.

Hedge funds and other speculators have hardly ever been more bearish on Treasurys, according to J.C. Parets, founder of money manager Eagle Bay Capital and a prominent market commentator who contributes to the blog All Star Charts.

At the same time, commercial buyers, a group that includes insurance companies and other institutional investors, who buy futures contracts to hedge their exposure, have never been more bullish, according to weekly positioning data released by the Commodity Futures Trading Commission.

By Joseph Adonilfi @ Market Watch

Last Thursday, Bloomberg reported that the median monthly rent in Manhattan stalled out, falling 1.2 percent in September to hit $3,396. “It was only the second year-over-year decline since February 2014,” the outlet continued, citing a new study from appraisal firm Miller Samuel, and the brokerage Douglas Elliman Real Estate.

That second decline happened in March of this year. It was followed by a peak of 2 percent growth in June, and then rents in the Big Apple slowed again before falling last month. Further signs that the housing market has shifted include the fact that landlords are offering renters more sweeteners, like a month or two free; meanwhile, only 17 percent of all housing sales in Manhattan involved a bidding war this year, down from 31 percent last year.

“The market does not appear to be resuming an upward pattern anytime soon,” Miller Samuel’s president told Bloomberg.

And it’s not just Manhattan or New York. Over the last year, the rate of rent growth has dropped precipitously in Portland, San Francisco, Denver, and Houston as well.

Jeff Spross at the Week.

Like a field judge in the Olympic track and field events, Fed Chairwoman Janet Yellen may use her speech in Jackson Hole to start the race for a rate hike as soon as September.

Yellen will speak Friday from the Fed’s summer retreat at 10 a.m. Eastern. The subject of her remarks is “The Federal Reserve’s Monetary Policy Toolkit.”

“We see Jackson Hole as the ‘ready’ warning and look for Chair Yellen to err on looking at the optimistic side” of the outlook,” said Drew Matus, senior U.S. economist at UBS.

To be fair, Matus thinks the U.S. central bank won’t issue the “set” warning until its September meeting policy statement and then “go” at the December meeting.

But many economists think the central bank could “go” in September if the jobs data is strong.

The Labor Department has reported two strong months of employment gains — 255,000 for July and 292,000 for June.

“If the August employment report, scheduled for release on Sept. 2, is solid, then we expect the Fed to raise rates at its September meeting,” said Michael Gapen, chief U.S. economist at Barclays.

“We expect Yellen to deliver a stronger signal about the likelihood of near-term rate hike” at the Jackson Hole meeting, he added.