Is Renting More Affordable than Buying?

About 67% of renters plan to continue renting for financial reasons and believe that renting is more affordable than buying. While this is an opinion survey, not a mathematical formula, there is likely some truth to it. House prices have gone up dramatically in recent years. Even if it would cost less over a longer period of time to purchase a house, the up-front costs, and potentially the mortgage payments, are larger. People are getting regular paychecks, but most of it is being spent, not saved. Renters would need to ignore their rent payments to save up enough to buy, which would instead simply lead to eviction and bad credit. In particular, the percent of millennials who will continue renting for financial reasons, many of whom have student debts, has increased from 59% to 74% over the past two years. Half of renting Baby Boomers believe they will never own a home.

What’s more, affordability concerns are actually affecting interest in homeownership. Homeownership is part of the American dream. For many renters, convenience and affordability are bigger concerns than achieving that dream just to say you did it. 6% more renters than last year are satisfied with their rental experience, and even in the face of rent increases, a full 15% more do not plan to move. These trends are not necessarily optimistic, though. Renting isn’t getting any cheaper; it’s becoming the best available option for many people, not an ideal.


Student Loans Can Crush Homeownership Dreams

There are three major ways student loans can have a drastic impact on ability to own a home. The first is debt-to-income ratio. Most mortgage officers want your expenditures to be less than 36% of your income, and expenditures include student loan payments. Though those with a college education tend to make more money, because student debt can reach such high numbers, about 20% of applicants with student loans can’t meet this requirement.

Another is credit score. Currently, about 8% of borrowers are denied mortgages due to their low credit scores, and about 40% of those with student loan debts are expected to default on their loans by 2023. Once the debt stops being paid, credit score plummets, and it becomes near impossible to qualify for a loan.

The last barrier is down payments. Even if student loan borrowers have enough income to make the payments on time, often they aren’t able to save much — if any — of their yearly income. They aren’t able to pay the lump sum required for a down payment.

The result: well over 50% of current graduates with student loans will not be able to purchase their own home for decades.  This exacerbates the strain currently impacting rental availability, and further disrupts housing markets.


Cash-out Refis Highest Since 2008

A cash-out refi is a type of mortgage refinancing in which one borrows more than the remaining balance on their current mortgage, with the difference as cash. With interest rates as high as they are right now, refinancing for a better rate — the most frequent incentive to refinance — isn’t going to happen. That means a greater percentage of refis are of the cash-out type.

It’s uncertain whether the number of cash-out refis is increasing; their percent share is going up mainly due to fewer rate refis. There are other reasons to see an increase in cash-out refis, though. One is that retirees, whose numbers are presently on the rise, are wanting to invest money in repairing or remodelling their homes, and are using the cash from a refi to do so. In addition, two other options for cash, home equity loans and lines of credit, are no longer tax-deductible to the extent they were previously.

If you’re considering a refi, give us a call.  We don’t handle loans, but have over 25 years of experience with lenders in LAs South Bay, and can help you select from the best.


Want To Be An Appraiser?

Becoming an appraiser is now easier than ever.

Recent years have seen fewer new applicants to become an appraiser and many current appraisers are retiring soon.  The result has been an extreme shortage of appraisers.  Over the past two years, this has led the Appraisal Foundation’s Appraiser Qualifications Board to conduct a long review its application process.

Training and education seem to be at the root of the problem.  Compensation for appraisers is generally judged as inadequate, given the educational requirements.  In addition, on-the-job-training is virtually non-existent for two reasons.  First, currently practicing appraisers resist training their future competition.  Second, the structure of the industry doesn’t provide training programs, and doesn’t provide compensation for mentoring new hires.

The decision was made to lower the minimum education requirements for an appraiser license or certification, effective May 1st of 2018.  Previously, licensees needed at least 30 semester hours of college education and certified appraisers at least a Bachelor’s degree. The basic license will longer require any college education. There will be multiple options to acquire a certification, all but one requiring some college education.


Appraisal Foundation drastically reduces requirements to become an appraiser

Are Changes Coming to Prop 13 in November?

Last December, an initiative was circulated for an amendment to Proposition 13. With voters concerned about rising property taxes, Proposition 13 passed in 1978, limiting property taxes to 1% of a property’s value at the time of purchase and mandating a maximum 2% yearly increase. Now the League of Women Voters and multiple nonprofit groups want to modify that law to create a split-roll system.

This proposed split-roll would make it such that the Prop 13 limitations would only apply to residential property, not to commercial or industrial property.  Unforeseen by those who drafted Prop 13, commercial and industrial property seldom changes ownership, which resulted in windfall profits from tax avoidance for owners of such property.  The changes would have commercial property taxed based on fair market value, with exemptions for small businesses and commercial agricultural property. The proposed amendment would allocate 60% of the revenue to local governments and 40% to schools. This initiative is currently pending official review before it can be added to the November 2018 ballot.

The estimated effect of the amendment ranges from approximately $6 billion to $11 billion of new tax revenue per year, depending on the market that year. Teachers are in favor of the increased funding for schools, especially after Prop 13 moved some funding and control from local school systems to the state government. As expected, business owners and anti-tax groups are opposed. Governor Jerry Brown, who was also governor when he signed the proposition back in 1978, asserts that it’s too late to try to propose a new ballot measure to lower the threshold for more taxes. Proponents, while lacking funding, believe that they have grassroots support.

Easing the Probate Burden for Your Heirs

Last year California introduced a newer, simpler, way to bequeath real property to your loved ones.  Before this many homeowners went through a long process of creating a living trust, transferring real estate into the trust, and leaving it to the heirs, aka successor trustees, to sort it all out.  In most cases it took an expensive attorney on both ends … to create the trust, and to unwind it.  It was easier than probate court, at least that’s what we were told.

For most homeowners, the one page, revocable Transfer On Death Deed (TOD Deed) will transfer your home to your heirs without the need for an attorney, a living trust, a court probate, or a real estate agent.  It’s not the perfect solution.  It won’t work for everyone, but for most it’s a major improvement in how we handle our final affairs.

The law works best for an individual whose most valuable asset is their home, and who otherwise has limited assets.  Under such circumstances, the house can be transferred by the TOD Deed, while other assets may be handled via naming your intended heir as a beneficiary.  California, like many states, allows automobile owners to identify a beneficiary when registering the vehicle.  Many stocks, bonds, bank and brokerage accounts may be transferred in a similar manner.

Key Facts for the TOD Deed:
► May be changed or cancelled at any time prior to death
► Does not supersede joint tenancy or community property
► Property must be residential, 1-4 units
► Deed must be notarized & then recorded within 60 days
► Applicable taxes remain in force
► Transfer may be subject to existing debt

A copy of the current form may be found at this link to the Los Angeles County Recorder’s office.  Not being attorneys, real estate agents are not authorized to file for you.  However, we can provide the information and explanations you need to complete the form.

If you’d like more information, call us at 310-963-4788 or write to  We’d be happy to stop by with the form, instructions and a list of frequently asked questions, and the answers. No cost. No obligation.

Do Foreign Investors Cause Rising Prices?

Imagine finding the perfect home for you and providing an offer above asking price. You’re going to feel good about your chances. But there’s a problem. Many sellers are more likely to take an all-cash offer over an offer including a down payment and a loan. You’d need to really wow the seller with a much higher price to compete with an all-cash offer, driving sale prices above already high asking prices. Chances are it’s a foreign investor that doesn’t even plan to live there, which can be even more frustrating when you don’t get the deal.

It’s very difficult to know whether a buyer is a foreign investor, though, since California does not require buyers to disclose citizenship or residency. There are a few signs. One of the biggest indicators is an all-cash offer. Foreign buyers are roughly twice as likely to pay all cash as domestic buyers. If the tax address is out of state, you know that the buyer probably doesn’t live here, though you don’t necessarily know where they live. You can try to look at the surname, but that isn’t a great indicator given the ethnic diversity of California as a state. What if all three look like a foreign investor? Is that a good indicator? Probably, but even that isn’t guaranteed.

What we do know is where foreign investors are coming from. In California, it’s predominantly East Asia. China in particular has historically dominated California’s foreign investment scene. Even as that number is dropping due to legislation in China making it more difficult to take money out of the country, investors from other countries in East Asia are picking up what Chinese investors are leaving behind. And the numbers are still rising overall.

Does foreign investment actually affect prices, though? Maybe. In Vancouver, Canada, instituting a tax on foreign investment drove prices down initially, then they rebounded back to where they were before despite the number of foreign investors dropping. Prices had been rising quickly, so perhaps it gave a short reprieve without much long-term effect. In California, it’s clear that there is some effect. How large of an effect is up for debate, and foreign buyers probably don’t affect the market as much as lack of construction and outdated zoning laws.