OAK NOTES from Grace Bishop
February 2021


JEFFREY CZUM
 
YOU'VE LIKELY HEARD ABOUT PROP 19, BUT HOW WILL IT IMPACT YOU?

Last November, California voters passed Proposition 19, impacting property owners in potentially two ways. The new law allows homeowners to transfer their property tax assessment to a new California home up to three times. This provision officially goes into effect on April 1, 2021. Prop 19 also impacts taxes on inherited properties. This portion went into effect earlier this week, on Tuesday, February 16th.

 

Transferring Your Property Tax Basis - Effective April 1, 2021

For some homeowners, the ability to transfer their tax basis up to three times means it's time to move. Previously homeowners could only transfer their tax base once in their lifetime and only within the same or a very limited number of counties within the state. Now homeowners aged 55 and over can move and transfer their current property tax assessment to a new primary home anywhere in California. For some, the desire to downsize, move closer to family or even finally purchase their dream home, can become a reality. The law also applies to the disabled and victims of natural disasters, like the California wildfires.

Prior to Prop 19, homeowners were also limited to the purchase of a new primary home that cost the same or less than the one they're selling. Now homeowners can purchase a property up to $1M more than their existing home in order to claim the full benefit; after $1M, the transferred tax basis will be prorated.

For example, let's say your current home has a "base year value" of $500,000 (this number can be found on your property tax bill), and it sells for $900,000. You find and purchase your dream home (in California) for $1,200,000. Your new home would have a tax base year value of $800,000.

  • Original property has a base year value of $500,000 and sells for $900,000
  • Replacement dwelling is purchased for $1,200,000
  • The replacement dwelling's new base year value is $800,000
    • $1,200,000 - $900,000 = $300,000
    • Property's "base year value" (from property tax bills) = $500,000
    • $300,000 + $500,000 = $800,000

Prop 19 allows you to transfer the tax base up to three times, however, the replacement property must be purchased within two years of the sale of the original property.

 

Inherited Properties Have New Restrictions - Effective February 16, 2021

With Prop 19 now in effect beneficiaries could see a substantial increase in their property taxes for inherited property on or after February 16th. Where previously there was no limit to exclusion, Prop 19's exclusions apply only to the first $1M of value. 

For example, if a family home has a base year value of $300,000 and a fair market value of $1,500,000 at the time of transfer to the beneficiary, the adjusted base year value is $500,000. 

  • Excluded under Prop 19 is the $300,000 plus $1,000,000
  • The replacement dwelling's new base year value is $500,000
    • $300,000 + $1,000,000 = $1,300,000 
    • $1,500,000 - $1,300,000 = $200,000
    • $200,000 + $300,000 = $500,000

Beneficiaries must also now live in an inherited property as their primary residence in order to get the tax break. They have just one year to establish the property as their principal residence and must live in the home continuously in order to avoid reassessment. (However, if the inherited property value is more than $1M over the original tax basis, a reassessment is still likely.)
 

Of course this only touches upon the basics. If you have questions please reach out. You can also read more about the new laws here.

 

*Consult with an attorney/accountant to confirm how the new laws apply to your circumstances. Prop 19 comes with limitations and these statements are intended to be informative but not interpreted as legal guidance.

 



RECENT TRANSACTIONS

MARKET UPDATE: JANUARY 2021


 

To understand the current East Bay real estate market, we need to think back to what a "normal" January market looks like. Typically, January and February are the slowest months of the year. The homes that sell tend to be less attractive to buyers, so prices and other key metrics are also at their low points. 

But not this year. The seasonality that we would normally expect in January is affecting the market far less than usual: COVID is inspiring people to move - to find more space, to leave the region - and this is spurring activity to its highest levels in years. 

Even though the number of available listings was up 27% since last year, it was still not enough inventory to meet buyer demands. Homes under contract were up 51% year-over-year, and as you can see in the table above, sales were up in January by 46%. Median price spiked, growing 22%; homes sold 8.6% over asking (twice as high as last year); and sold within 24 days on market, a 39% decrease.

We expect that market activity will remain higher than last year due to the forces listed above, and differences may even increase when we start to compare to March-June 2020 when we were dealing with shelter-in-place. Owners, if you're thinking about selling, demand is particularly high so now might be a good time to take next steps. Buyers, be patient: inventory is usually low at the beginning of the year and will most likely pick up over the next few months - hang in there!

 



ENHANCE
 
INTRODUCING ENHANCE: A BETTER WAY TO IMPROVE YOUR PROPERTY

Starting today, Red Oak Realty is announcing a unique, new home improvement program that helps sellers improve their property before they sell. 

Unlike home improvement services provided by other real estate brokerages, the entire project is handled by a team of professionals, including a General Contractor, professional designers and project managers. This means the property owner does less work while getting a great result, which likely leads to a higher sales price.

The work is performed through Red Oak's exclusive relationship with The Home Co., a respected design and staging company that has been servicing the East Bay since 2007. 

Enhance already has a few projects under its belt and the results are impressive, including a listing that sold 40% over asking in 6 days. Learn more about Enhance here and reach out if you would like more information.

 


MORTGAGE UPDATE

For the week ending 2/12/2021, the 10-year Treasury note closed at 1.215 - easily the highest level since March 2020 - and Fannie Mae mortgage bonds followed suit by continuing the steady push higher from record lows in the last week of December. The sudden movement to higher rates has not been unusual in the COVID era as sharp increases in interest rates have been short-lived due to the continued lag in the economy and the aggressive stance of the FED as a buyer of bonds. Many traders feel that this most recent move may have some staying power but that remains to be seen. The general thinking is that when bonds are breaking barriers that haven't been challenged in nearly a year, it's not safe to bet on a return to all-time lows. The bottom line from most industry watchers is that this will continue to be a 'rising rates' environment until the markets prove otherwise.  

If you have not refinanced yet, it's probably a good time to take advantage of rates with a "2" in front of them while they last. If you're considering buying a home, it's still a great time to get preapproved for a mortgage. Please contact Faramarz Moeen-Ziai at CrossCountry Mortgage via fmz@myccmortgage.com or 510.254.4697.

FMZ TEAM CROSSCOUNTRY MORTGAGE
Personal NMLS342090 · Branch NMLS2020284 · Company NMLS302

 



FARMER & THE FIG
 
LOCAL BUSINESS SPOTLIGHT: FARMER & THE FIG

It's well known that the pandemic has dramatically hurt our restaurant industry and it's important to help promote their business in these difficult times. For the last 25 years, the Farmer and the Fig has provided catering services and produced lunches for schools and business accounts with local and organic ingredients. Due to the pandemic, their normal means of business aren't possible so the Farmer & the Fig pivoted and now provide vacuum-sealed home meals so that you can have the freshest meal possible. With new recipes supplied on a regular basis you know you'll be getting something unique and tasty every time. Bon appetit!

733 Allston Way Suite 3, Berkeley · 415.796.6425 · info@farmerandthefig.com



Grace Bishop
Realtor | #01245471
510.872.4512