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CA renter
Participant[quote=no_such_reality]@xbox I hear you, I too share the beef with all the people living here but pretending to reside elsewhere for their car title, income etc.[/quote]
X3
This really ticks me off, as well.
Participant[quote=moneymaker]It seems to me there are 2 options for the government for stimulus, lower rates or create jobs. Ok already tried to lower rates, now can’t go any lower. So time to create jobs soon, 2 ways to do that also. Hire more government workers/create infrastructure jobs or the Trump strategy (deport the illegals). Neither of these strategies increases GDP so will also ultimately fail. The lowering of rates was suppose to increase jobs by getting businesses to invest with new start ups and such. Problem is most investment has been overseas. Maybe the China problem will stop this, but I doubt it. Ultimately China will start an economic war by dumping dollars and the US will respond with protectionism. Just my 2¢[/quote]
Government spending can indeed increase GDP.
“Gross domestic product can be calculated using the following formula:
GDP = C + G + I + NX
where
“C” is equal to all private consumption, or consumer spending, in a nation’s economy, “G” is the sum of government spending, “I” is the sum of all the country’s businesses spending on capital and “NX” is the nation’s total net exports, calculated as total exports minus total imports (NX = Exports – Imports).”
Read more: Gross Domestic Product (GDP) Definition | Investopedia http://www.investopedia.com/terms/g/gdp.asp#ixzz3kIF7Y5A6
Follow us: Investopedia on FacebookParticipant[quote=harvey][quote=CA renter]
Livin’ gets it, Brian. Sorry, but the Fed did not save the day. They’ve only prolonged the recession and will end up making it worse because the problems are continuing to pile up with every passing year.[/quote]Uh, the recession ended in 2009, when the Black Eyed Peas are at the top of the charts and “octomom” was in the headlines.
You might want to tune in some OMI and check the business section of the newspaper.
Oh wait … newspapers went away years ago, just like the recession. This works too:
U.S. second-quarter GDP growth revised sharply higher to 3.7 percent
http://www.reuters.com/article/2015/08/27/us-usa-economy-idUSKCN0QW1IF20150827%5B/quote%5DGDP is a very clumsy way to measure how well the economy is functioning. It doesn’t address whether or not the money is being spent wisely or sustainably, and it doesn’t address the allocation of the benefits of production.
I prefer to look at real wage growth and purchasing power, in particular. This is how growth and recessions are defined by people who live in the real economy, not economists in ivory towers.
http://www.advisorperspectives.com/dshort/updates/Household-Income-Distribution.php
Here is a chart of the official unemployment rates (U3 and U6), and the ShadowStats numbers:
http://www.shadowstats.com/alternate_data/unemployment-charts
Of course, we must also look at debt levels — and how that money is being spent — since that will often help determine how the economy will do in the future. Self-liquidating debt is usually good, but consumer debt is usually bad, especially if it’s being used to offset declining wages/purchasing power.
http://www.tradingeconomics.com/united-states/government-debt-to-gdp
Participant[quote=FlyerInHi]Central banks can act without the burden of the political process.
Would you rather they didn’t act to stabilize the economy and allow an economic depression? Millions of jobs lost, human capital evaporated, dreams not realized, more suicides, more malnutrition, more death, more crime, etc… all that would set back human advancement.Money is just a concept and a tool for us to use. There are no natural laws governing money.[/quote]
Livin’ gets it, Brian. Sorry, but the Fed did not save the day. They’ve only prolonged the recession and will end up making it worse because the problems are continuing to pile up with every passing year.
The Federal Reserve is independent of the U.S. govt only in theory. If you think that politicians and high-ranking Fed officials (and high-ranking executives from the financial industry, among others) don’t discuss things and coordinate activities, I have a bridge to sell you…
Participant[quote=FlyerInHi]Learn what, CAr? The economy is now well above precious peak. Houses were built but we still have a shortage. It’s not like houses are sitting empty.
Overall, we are better off. Until we are worse off, there’s nothing to learn but to do things better.
It’s might be better to have booms and busts but overall higher growth over decades.[/quote]
Prices of assets are not “the economy.” When the Fed/govt manipulate markets the way they have over the past ~7 years, we no longer know how to determine the value of things.
Bubbles, booms, and busts are NOT healthy for the economy, no matter how desperately you try to paint it otherwise. As the market was crashing the last time (2008), there seemed to be a consensus agreement that the Fed had held rates too low for too long which resulted in the devastating credit/housing bubble and subsequent bursting of that bubble. So, what did they do to solve the problem? Break up the banks and force derivatives to be sold on public exchanges? No. Honestly evaluate counterparty risk where all of these derivatives are concerned? No. Reinstate Glass-Steagall so that commercial banks were separate from investment banks and insurance companies? No.
Instead, the Fed added fuel to the fire and dropped rates even lower for an even longer period of time, not to mention all of the other purchases of various assets at well above market price, etc. They ignored warnings (often by the same people who were warning about bubbles in the late 90s and mid-2000s) about the risk of blowing yet another credit/asset price bubble in stocks, real estate, bonds, commodities, etc.
The lesson was not learned. And now, they have not only caused the same kind of damage as we had during the past couple of bubbles, but I believe that we are in even more dangerous territory because of our exceedingly high debt levels and the already low/negative interest rates, which leaves them very little ammunition to fight the next fight.
Rising asset prices do not make a productive economy. If people never grasp this fact, we will be doomed to repeat these same mistakes over and over again.
[edited to add the following]:
——————
“Quantitative easing—the Federal Reserve‘s program of buying long term government and mortgage debt known as QE—is one of the more controversial policies practiced today. While there is evidence that it has successfully lowered interest rates, and therefore put more money in the pockets of creditworthy businesses and Americans, opponents of the policy have argued that the risks associated with the policy far outweigh the benefits”
This Former Fed Official Thinks Quantitative Easing Has Been a Disaster
Participant[quote=livinincali]I think there’s a couple points here to consider.
Tax policy in CA certainly encourages inherited properties to be kept within the family either via heirs moving into the property or as a rental.
I’m not entirely convinced that in 10 to 20 years that we could see significant owner user communities turn into mostly renter communities for a couple of reasons.
1) I just don’t think the market for dated 3/2 smaller properties at @ $2500+/mo is really that deep.
2) I think some significantly portion of properties will get the equity striped out via reverse mortgage or some other means.
3) I think this next generation that inherits these properties may want the instant gratification of selling rather than land-lording even though it might be in their long term interest to do so.The last point is that there is a significant number of likely dated properties that could potentially hit the market over the next 10-20 years. Might be a flippers dream come true or it might just mean appreciation going forward in housing is much more limited than people are currently considering.[/quote]
Agree with this.
And we can’t forget the foreign investors who were speculating on U.S. real estate because they had so much money from their own countries, thanks to their own central banks and governments. If their economies crash, this could have a major effect on U.S. real estate.
Participant[quote=livinincali][quote=CA renter]
Stuff like this…how interconnected is it? A short-term blip, or is this a sign that things are about to get really interesting?
[/quote]Subprime was contained right. Biggest lesson I learn from the housing bubble is that there’ no such thing as decoupling. Not sure when it’s going to matter (well maybe today?), but it’s going to matter at some point.[/quote]
It’s crazy how they never learn, isn’t it?
Participant[quote=CA renter]
But now that there is turmoil in currencies, commodities, and international bond and stock markets, we’ll get to see how leveraged some of these positions have been and how this might affect other types of markets around the world. It’s entirely possible that much of it is interconnected.[/quote]
Stuff like this…how interconnected is it? A short-term blip, or is this a sign that things are about to get really interesting?
——————
“World stocks and oil prices plunged Monday as a global sell off accelerated on worries about the health of China’s huge economy.
China stocks crashed and all Asian markets suffered major losses. Europe’s major indexes opened about 3% down before trimming those losses slightly.
Oil slumped 3.5% to a new six-year low of just over $39 a barrel.
China’s benchmark Shanghai Composite index declined 8.5%, wiping out all gains made this year. Many companies, including some large state-owned firms, fell by the maximum daily limit of 10%. The index is now down 38% since its June peak.
The smaller Shenzhen Composite lost 7.7%.
Related: China’s stock crash … in 2 minutes
In Japan, the Nikkei closed down 4.6%. Germany’s DAX shed 2.7%, as did the FTSE 100 in London. And Wall Street was poised for another sharp drop on Monday.”
http://money.cnn.com/2015/08/23/investing/world-stock-markets/
Participant[quote=bearishgurl][quote=EconProf]BG: Not everyone wants to be a landlord.
The decision of heirs to rent out rather than sell an inherited SFR depends upon a whole host of considerations. First, most heirs, especially if they are several, may have differing liquidity needs. They also face the question of managing the property, perhaps from afar, and dealing with all the headaches of landlording. SFRs are the least profitable of real estate categories from a cash flow standpoint. Yes, they may appreciate, but CA has had years-long episodes of depreciation at times, and having a tenant for a few years usually hurts the value.
Property taxes are only one of many expenses involved in making this investment decision, so it alone will not be the deciding factor.
BG, I agree with your opinion about the unfairness of the present laws. They grant an unearned tax break to an underserving population. This “subsidy” must be made up by other taxpayers.
But you have a tendency to jump to broad and unwarranted conclusions based on your own experiences in your particular older neighborhood. What’s needed are in-depth, unbiased, peer-reviewed studies of the total revenue loss due to these two Propositions.[/quote]EconProf, I myself never want to be a landlord again. I agree with heirs’ differing liquidity needs but one of my questions (if there were siblings) was “Would you attempt to buy them out (in order to get an investment property with an ultra-low assessment)?”
I did not state it here but both properties which were the subject of my two questions were free and clear. This fact, combined with their low assessments, makes turning them into rental investments (for a locally-based heir) a good option, considering the “safe” alternatives today. Frankly, I’ve never seen a house passed down around here which wasn’t free and clear at the time of the owner’s passing, EXCEPT ONE around the corner which had been vacant for nine years prior and in terrible disrepair (where ~$20K is currently owing on it). When their mom finally passed, the 60-something son and daughter finally came in on weekends in a 4-month time period and did major repairs themselves and cleaned the property up.
My “broad and unwarranted conclusions” stem from what I’ve personally seen and witnessed on the ground almost the entire time I’ve lived in SD (~40 years). At all times, I have lived in well-established areas where there were always “heirs” occupying SFRs (some were still caring for infirm parent(s) but were expected to “inherit” the family home one day). In most instances, they were only children. Usually, the only child or sibling who took care of their parent until they died never made good money on their own to begin with so did not really “sacrifice” a career to take care of mom and/or dad. In any case, they usually needed a “free” place to stay at various times in their lives, and their parent’s home was always convenient for that.
One of my biggest “heir” issues is with extremely low-income “heirs” attempting to shelter themselves in their former family home after their last parent’s death. This typical heir either did not receive any cash, received very little cash or had to use what cash they were entitled to from their parent’s estate to buy sibling(s) shares out of the property. The vast majority of them had no savings of their own and likely could not qualify for a mortgage. I actually know of two “heirs” who took over their parent’s home after their deaths who had been living out of their car and 5th-wheel camper for months/years before their last parent passed and did not want to leave SD under any circumstances.
Even if a SFR is 1000 sf or less, it is a SFR, usually more than 40 years old with a >=5000 sf lot and needs constant maintenance which, as we all know, is not cheap, especially pest control and tent fumigation. Nor are gas & elec and water and sewer cheap (low-income ratepayers eligible for 20% discount on SDG&E bill, however). If a very low-income heir takes title by themselves of a home they inherited, the property invariably ends up quickly going to waste with trash and discarded items piling up around the property in 4′ high weeds causing neighbors to report the address to the city, who fines the heir/”homeowner” (for the first time in their lives). You can’t squeeze blood out of a turnip.
It’s a sorry situation for their neighbors and I’ve seen it all over SD, South and East County (I’m sure it happens in North County as well as all over the state).
There IS a such a thing as being “too poor” for homeownership … even if that home is free and clear and has an ultra-low assessment attached to it.
I’ve had this very discussion with one of the top probate attorneys in town, who told me, “I don’t care if they (the heir) had been thrice bankrupt and/or just got released from prison yesterday. If they are named in the trust, they are entitled to their portion. If they are only children and the trust leaves them whatever the remaining parent still had at the time of their deaths, then it is all theirs. What they choose to do with it is their business.” The attorney was right, except a lot of these “heirs” never had an attorney and never received good advice for their personal situations after their parent died. Since some of them have been making poor choices all of their lives, what is to stop them from making poor choices when they are finally “heirs?”
I apologize if the above sounds judgmental to some folks. This is my “brethren” I’m discussing here and I don’t have a college degree myself (but had a good public K-12 education and 2.5 years of college). For the life of me, public schools used to be very good to excellent in SD, South and East County (at the time these people attended them or abt 1955 – 1975). I’ve interviewed dozens of people (mostly age 55-62) in recent years in attempting to help them with their seemingly intractable problems and I often had a difficult time understanding how they allowed themselves to end up in the situations they were in. I came to the conclusion that they apparently just never took charge of their own lives.[/quote]
Just to be clear, I do NOT have as much of a problem with inheriting the Prop 13 basis, but if an heir chooses to do that, then the cost basis should NOT be stepped-up for the purpose of lowering cap gains taxes. These are obviously different taxes, and different allocations, but just saying that either you inherit the cost basis, as with Prop 13, or you don’t — pick one, because you can’t have it both ways.
Personally, I believe in enforcing private property rights, especially as it relates to one’s primary residence. And a home that has been in the family for many years — especially one that is the primary residence for one or more heirs — should not be taxed in a way that would force the family member(s) out. But this applies to only a single property for the person living there. If they get Prop 13 protection on the family home, then they should not get it on any other property. I advocate that in every case, FWIW, people should only get Prop 13 protection on a SINGLE piece of property, and it should only apply to a primary residence.
What I oppose is a tax subsidy for corporate owners, wealthy owners of large swaths of land, and landlords who are not subject to rent control laws that would ensure that the tax subsidy is passed along to the renters.*
*I’ll address NSR’s suggestion that Prop 13 keeps rents low for renters in the next post.
Participant[quote=no_such_reality]That laborious activity is what is needed. Corporations don’t need prop thirteen. An heir I’m more neutral on. Like the housing authority starting the thread, is the problem less than 1% of owners or 30% of owners?
As for non principal residence, I think those impacts would actually hurt the 99% more than it would benefit them. It would severely impact the rental market quality and availability and I doubt it would lower sales prices as the homes. Net result, desirable areas would become even more income elite with even fewer rentals.[/quote]
Prop 13 has kept many properties of the market because long-time owners are having their profits subsidized by all of the other taxpayers who are paying market-rate taxes. The subsidy is an incentive to hold onto real estate, as opposed to pushing landlords and owners of second (or third, fourth, etc.) homes to sell during market peaks.
Property taxes would rise to unreasonable levels mostly during RE bubbles. If rents don’t keep up with the rising taxes (and they won’t because renters can’t get NINJA mortgages to pay rent…you can only charge what the market will bear), it will incentivize landlords and other owners of non-owner-occupied properties to put these properties on the market to sell. This would put a damper on prices and help offset the bubble’s momentum at exactly the right times — when prices start to become unsustainable.
While I detest gimmicky mortgages and manipulations that are purported to “help people buy their own homes,” I do believe that the rights of people to own their own homes should trump the rights of landlords to profit off of renters. IMHO, society is better served when families control their own homes and housing costs, when they are more engaged in their communities (as owners and more established residents tend to be), and when people can own a paid-off residence as they near retirement age. Ideally, homes should be very affordable to buy, and they should be viewed as shelter, not as “investments” or speculative purchases.
In California, part of the reason that our housing prices are so high is because the majority of our housing units (apartments are included in this) are owned by investors. While I understand that everyone would like to be a mini-Trump, I don’t think it’s good policy to allow the already wealthy to profit from the poorer members of our society.
Participant[quote=scaredyclassic]“The illusion of freedom will continue as long as it’s profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way and you will see the brick wall at the back of the theater.” – Frank Zappa[/quote]
Another incredibly intelligent and wise human being. Thanks for sharing the quote.
ParticipantAnother great video, with clips from over the decades, where Bernie Sanders discusses U.S. involvement Latin America and other countries…
[edited to add] And he speaks about the disappearance of the middle class and about the danger of going to war against Iraq.
The man is one of the most intelligent people to ever work in D.C., and his integrity is unparalleled, IMHO.
Participant[quote=bearishgurl]I don’t want to hear any more complaining on this forum about inventory shortages causing skyrocketing housing prices (especially in coastal markets) from people who now profess not to care about the long-term ramifications of Props 58 and 193.
I get it that if an elephant is standing right in front of you, it can be a bit “tricky” to see what is on the other side . . . to get the complete “lay of the land,” if you will, before navigating your way around it :=]
I asked two very relevant questions earlier in this thread and the fact that no one answered them or commented on them is very telling to me.
[quote=bearishgurl]Food for thought and two questions for Piggs:
If you owned a SFR in SD County in good shape which was worth $400K, it had a current tax bill of $600 per year and could fetch $1750 in monthly rent, would you ever sell it?
If you had one or two siblings and your last parent recently passed and left their principal residence in San Diego County (a SFR worth $550K) to all of you in equal shares, would you attempt to purchase your siblings’ portion from them (~$275K – $367K) to take title to use the property for a rental investment? Current assessment is $78K, resulting in a current tax bill of $850, which would carry over to any new (child or granchild) owner. Monthly rent would be $2200 – $2400.[/quote][/quote]
I can answer this because we did sell a house that was worth ~$400K — with an original assessment in the low $100K range — and could have commanded somewhere around this rent (probably higher today).
Why?
1.) Because I was the trustee/executor (and beneficiary) of the trust and needed to liquidate some holdings in order to distribute funds to multiple beneficiaries.
2.) The market was in the beginning stages of tanking (mid-2007), so I wanted to get out and realize the gains from the sale before they disappeared. For the record, it has only now reached approximately the price level that we sold it at; it dropped by about 40-50% from peak to trough when the last bubble burst.
3.) It was in an area that was a bit too far for me to manage well directly, and our kids were quite young at the time, so I was definitely not looking to add more to my plate.
For many heirs, their parents homes can be depressing places after their parents have passed away. Also, many of these older homes have a lot of deferred maintenance issues, and the kids don’t have the money, the time, or the desire to deal with it.
So, yes, there are many reasons why people sell homes that are paid off (actually, having a paid off house makes it even easier), even when they have very low assessments as a result of Prop 13. In the vast majority of cases that I’m aware of, people have sold their parents’ homes when the parents died.
Even the home we live in now was owned by an elderly lady who bought in the 1970s. The house was paid off, had a low assessment because of Prop 13, and the kids wanted/needed to sell it after she passed away. It happens all the time.
Participant[quote=XBoxBoy][quote=bewildering]Dumb question. Does prop 13 protect tax rates even if you move out and turn the house into a rental? I assumed you had to be an owner occupier to benefit. I thought prop 13 was meant to protect old people from having their fixed costs change.[/quote]
Not only does it protect rental properties, it protects second houses that you don’t live in, and surprise, surprise, commercial properties.
Here’s an article lambasting the tax break that commercial property owners are getting from this system.
http://www.huffingtonpost.com/robert-reich/corporate-welfare-california_b_8017580.html
Couldn’t agree more that this is totally wrong and needs to be addressed.[/quote]
This is what I’ve been saying here for years. Prop 13 is a subsidy to many very wealthy people. I know of an apartment building in L.A. that has been owned by the same family for decades. It’s worth millions, but their tax bill is ~$14,000, IIRC.
Unlike BG, I don’t have as much of a problem with inheriting the Prop 13 tax basis (though heirs should not be able to step-up their cost basis for cap gains, either, if they keep the Prop 13 subsidy), because the reason Prop 13 passed was to keep people from being taxed out of their homes. I don’t think anyone should be taxed out of their family homes, but these homes should be their only residence.
While I fully agree with Prop 13 protection for a single primary residence, there is no reason in the world for us to be subsidizing landlords, vacation rental owners, absentee/second home owners, and wealthy commercial and industrial property owners, not to mention people like the Pardee family who are probably getting tax subsidies in the millions each year (not just Prop 13, but the Williamson Act).
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