Prop 13: The Mother of All Real Estate Initiatives


Passed in 1978, Proposition 13 slashed property tax rates statewide. 40 years ago, when CA’s voters approved Prop 13, homeowners and other landowners immediately realized a massive savings: $7 billion. Since then, that number has more than quadrupled. A new report out this week revealed that homeowners will save roughly $30 billion in 2018 thanks in large part to Prop 13. In L.A. County alone, those savings will amount to more than $7.4 billion.

Under Prop 13, the longer homeowners have owned a residence, the more they save on annual tax payments. Since its passage, it has limited property tax payments to 1% of a property’s assessed value, plus a small percentage used to pay off voter-approved bond measures. The taxable value of a property is also locked in once it changes hands and can only rise 2% annually.

Critics of Prop 13 argue this kind of disparity is one of the measure’s greatest failings: It disproportionately benefits homeowners in wealthy communities where land values have soared since passage of the initiative. Supporters counter that the measure’s limits on tax increases makes it easier for buyers to calculate payments down the road and make financial plans for the future.

California voters will soon decide on a pair of measures that could restructure some of Prop 13’s key provisions. Proposition 5, which will appear on ballots on Nov. 6, would allow homeowners over the age of 55 and those with a severe disability to take their property tax savings with them when buying a new residence. A separate initiative has qualified for the 2020 ballot and would end Prop 13 benefits for large commercial businesses, but leave in place savings for farmers, small businesses, and homeowners.

As always, the path to change is to vote.

How to Understand Your Realtor

Like many industries, real estate has its own unique terms and phrases. Turn those terms into acronyms, and what you have is little more than alphabet soup to those new to real estate. Here are some common RE (there’s your first one) acronyms as defined by NAR (National Association of Realtors):
ARM (Adjustable Rate Mortgage) is a type of mortgage loan whose rate is tied to an economic index, which fluctuates with the market. APR (Annual Percentage Rate) represents the total costs (interest rate, closing costs, fees, and so on) that are part of a borrower’s loan, expressed as a percentage rate of interest. BOM (Back On Market) denotes when a property or listing is placed back on the market after a contract is canceled. BPO (Broker’s Price Opinion) is the real estate broker’s opinion of the expected final net sales price, determined prior to the acquisition of the property.
CMA (Comparative Market Analysis) is the analysis used to provide market information to the seller and assist the real estate broker in securing the listing. DOM (Days On the Market) stands for a measurement of how long a listing has been on the market. FHA (Federal Housing Administration) is a branch of HUD, but is also a U.S. Federal Housing Administration loan provided by an FHA-approved lender. FSBO (For Sale By Owner) connotes a property that is for sale by the owner of the property.
PITI (Principal Interest Taxes and Insurance) combines the four costs that make up a borrower’s monthly mortgage payment. PMI (Private Mortgage Insurance) is an insurance sometimes paid by a borrower in monthly installments, typically of loans more than 80% of the value of the property. RI (Repair and Improvement) is the estimated and/or actual repair and improvement costs to a property. ROI (Return on Investment) is the profit on a real estate transaction after all costs (including purchase price) are deducted from a sales price.
Although it’s good for buyers and sellers to know how to speak Real Estate, all you really have to do is hire us to act as your agent, advocate, and translator.

Mid-century Homes Continue to Thrill

One of the most iconic and striking mid-century homes built as part of the Case Study House Program has hit the market again, this time for $3.6mil. At only 1,280 sq.ft. in an open-floor layout, the 1958 home in the Hollywood Hills is hardly a mega-mansion. Instead, “Case Study House No. 21″ is a study in revered minimalism. The home is one of less than 2 dozen structures still standing from a program started in 1945 by John Entenza, the publisher of Arts & Architecture magazine. Entenza challenged some of the biggest architects of the day — including Richard Neutra, Eero Saarinen, and Charles and Ray Eames — to design and build inexpensive homes that could be easily replicated to house the country’s booming post-war population.
House No. 21, designed by architect Paul Koenig, is a 2BR/2BA home with floor-to-ceiling glass windows and a steel frame with steel paneled walls. The bedrooms are separated from the living room and kitchen by a central outdoor court. There’s also a shallow moat-like pond surrounding the structure. The home is on the National Register of Historic Places and was designated a Los Angeles Historic Cultural Monument in 1999, shortly after Koenig himself supervised a restoration.
Case Study homes often fetch hefty prices given their architectural importance. Actress Kristen Wiig paid $3mil for Pasadena’s Case Study House No. 10 in late 2017. Case Study House No. 18, in Pacific Palisades, hit the market earlier this year for $10mil. Mid-century (and copycat) architecture continues to dominate the L.A. luxury market as one the most-desired home styles (see our 2 mid-mod pocket listings, Multiview Drive and Hollyridge Drive). Let us know if you’re interested in buying or selling a mid-century home. We’ve helped many happy clients do so.

Prices, inventory, and rates are all up this week

The number of new listings on® in September shot up 8% year over year, according to a report out this week. That’s the biggest jump since 2013, when the country was still clawing its way out of the financial crisis. And it gives eager buyers a lot more options to choose from (like our pocket listing pictured here). That’s a big shift from a year ago, when bidding wars and insane offers over asking price were par for the course. But it doesn’t mean the housing shortage has suddenly dissipated. Nationally, the total inventory of homes for sale was essentially flat compared with 2017—moving down 0.2%.
And while the U.S.’s median home price, at $295,000, was up 7% in September compared with a year ago, the increase in homes hitting the market helped to slow that rise. The median home price in September 2017 was a 10% increase over the previous year.
U.S. mortgage rates are at their highest in more than seven years. The average rate for a 30-year fixed mortgage climbed to 4.72% this week from 4.65% last week. That means homeowners and borrowers are seeing the highest rates since April 2011. This is the 5th straight week that mortgages have risen in the U.S. The 30-year average stood at 3.83% a year ago.

A Twisted Real Estate Market


In a report released this week by CoreLogic, home appreciation slowed to an 11-month low in 20 major U.S. cities, according to July year-over-year numbers. The combined national rate fell to 5.9% year-over-year, from 6.4% in July 2017, according to the data collected. 15 of 20 cities saw smaller monthly increases in July 2018 than in July 2017. Of the 5 cities posting gains, Los Angeles showed a 6.4% increase in appreciation.

While the national housing market twists and turns, the Federal Reserve announced this week that it would raise short-term interest rates by another .25%, and central-bank officials signaled they expected to lift them again later this year and through 2019 to keep a strong economy on an even keel.

The increase, which drew rebukes from Republican leaders, is the 3rd this year and the 8th since the Fed began to lift rates in late 2015 after keeping them pinned close to zero after the 2008 financial crisis. The Fed’s action marks the first time it has lifted its benchmark rate above 2% since 2008.