Tag Archives: homeowners

Which residents might benefit if property taxes are reduced or eliminated

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As numerous states in the United States consider eliminating property taxes, which residents would benefit? An argument about what could happen in Florida:

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If retirees on fixed incomes can’t afford their insurance payments and families can’t figure out how to cover their tax bill, maybe. Yet the number of Florida homes and buildings that are delinquent on their property taxes has fallen slightly since 2020. The number of foreclosures has increased a bit, but remains low. The state’s housing market is fraying and distressed sales are increasing, but that’s because of climate change and mortgage rates, not tax assessments. Floridians may not like paying a higher tax bill, and carrying costs might be spurring some of them to downsize. But in general, property taxes are levied on people who can afford them. The typical homeowner earns twice as much as the typical renter, and has 43 times the net worth.

Tenants are “the loser in all this,” Ken Johnson, a professor of finance at the University of Mississippi, told me. Many cities and counties offset lower taxes on owner-occupied properties with higher taxes on commercial residential properties. Landlords pass those costs on to their renters. The policy will also benefit longtime homeowners at the expense of prospective homebuyers. Low property taxes increase home prices, making it harder for people without a lot of money in the bank—such as new parents and just-married couples—to get approved for a mortgage. Then they remain tenants, subject to never-ending rent increases.

In addition to distorting the housing market, Amendment 3 will devastate public finances. Property taxes provide 43 percent of revenue to Florida’s municipal general funds, the bank accounts that cities and counties use to finance day-to-day services. Amendment 3 will cut collections by as much as 30 percent, and will hit hardest in areas with a lot of homes and not a lot of commerce. To cover the $12 billion budget hole, cities and towns will likely raise or impose sales taxes and sin taxes; increase fees at the DMV, permit offices, registrars, and courts; charge more for waste removal and water; and put additional taxes on tourists. The state will trade out a solidly progressive, uniformly applied tax for an obscure, regressive mishmash of charges.

But municipalities aren’t expected to make up all of the lost revenue. They’re expected to cut. Amendment 3 explicitly protects tax financing streams for schools, meaning that cities and counties are contemplating draconian budget reductions for public-safety offices, libraries, after-school programs, summer camp, day care, flood prevention, public transit, roads, parks, senior services, homeless shelters, legal-aid clinics, domestic-violence shelters, and many other things. Austerity will be regressive too, harming the poor more than the wealthy. Rich Floridians aren’t relying on the bus to get to work. They’re not picking up free meals, taking adult-literacy classes at the library, or seeing a dentist at a pop-up clinic in a middle-school gymnasium either.

These predictions suggest an immediate reduction or removal of property taxes could prove popular with homeowners but has longer-term consequences for those who are not homeowners and for communities at large who will have to adjust their tax base.

Is this then similar to the mortgage-interest deduction that tends to benefit people who are already financially okay? Is there a way to reduce property taxes for all residences?

Thinking more broadly, is there any way that Americans who live in or own different property types could work together to address their concerns about property taxes and local revenues? While homeowners might be fed up with rising property taxes, how does this intersect with concerns about tax breaks given to data centers or whatever is the latest development rage? Or the work of business owners to limit their local taxes when local schools and other amenities benefit from such monies? Or local government bodies raising rates in order to have the revenues they say they need to provide local services?

If the different actors are trying to find a good advantage for themselves, their actions could impact others. Perhaps it is time more communities have conversations about taxes and services. What are their priorities? What do they need? What issues do they each face? They might not agree and communities or states might take different approaches but they might find some common ground or new approaches.

Who should benefit more from selling a home: sellers, buyers, realtors, Zillow, others?

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The process by which a single-family home or other residential property is built and sold has been under discussion in recent years. Here is one argument about who should benefit more from the process:

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So, when the National Association of Realtors recently adopted a policy allowing limited off-MLS marketing, Zillow announced it would permanently ban any listing not posted to the MLS within one day. Essentially, Zillow — a company that doesn’t sell homes — is asserting it gets to decide how you can market and sell your home. 

Zillow claims it is protecting consumers from off-MLS marketing, which it says leads to longer market times and lower prices. But a 2024 study by Midwest Real Estate Data — the MLS serving Chicagoland — shows the exact opposite. MRED offers a Private Listing Network that shares listings with all member agents without circulating them to public websites. Homes first marketed through MRED’s Private Listing Network sold 55% faster, for more money, and at a higher percentage of list price (97.5% versus 95.4%) than those listed publicly from day one.

Our own experience across tens of thousands of transactions confirms the findings of this study. At @properties Christie’s International Real Estate, we developed a “private-to-prominent” listing strategy that starts with an off-MLS marketing period and builds to a full public offering. This approach has several benefits. It allows a seller and their agent to prepare the home for sale while building interest and demand. It also gives them an opportunity to test a price without having Zillow or other websites display any reductions that might be made prior to the public listing. And the listing does not accumulate market time during this premarketing phase. (Typically, as market times increase, buyer interest decreases.) 

This approach can result in faster, higher-value sales, often before the home ever hits the MLS, or Zillow. Most importantly, it keeps the seller in control. They choose when to list publicly and can accept or reject an offer at any time. 

The key here is at the end: “it keeps the seller in control.” Should the seller be the one calling all the shots and having the advantages?

Another argument could be made that the seller having the primary options limits potential buyers. Is the home reaching all the possible purchasers? If it is on a private network first, how often does it reach the general public? Could private listings build off existing networks, reproducing inequalities?

Or should Zillow and other actors play the primary role as many Americans look for real estate online? Is this more of a tug-of-war between the established real estate industry and the online competitors who offer information for any searchers without the need to contact an agent? There are a lot of jobs and a lot of money at stake.

Is there any role for communities or people who might want to access certain communities down the road? If the strength of local real estate is often taken as a sign of local vibrancy and status, should this only involve private actors?

I suspect this discussion will continue as different actors look for an edge in real estate. Hopefully this does not come down to solely who can lobby the most effectively.

When housing values and property taxes both go up

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American homeowners want their property values to increase. It builds their wealth. The equity they have in the home can be used for other purposes. They can feel like they made a good investment.

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On the other hand, fewer homeowners like the idea of paying higher property taxes. Particularly in states with higher property taxes, like Illinois, this is a constant source of frustration: don’t we pay too much? How come other states get away with much lower property taxes?

But, these two forces might just be linked. If your property is worth more, the taxes you pay on that property are likely to go up. In other words, the kind of property appreciation many homeowners want means higher taxes on that more valuable property. (This is not always the case: the value may go up but the property tax rate goes down or some program or exemption limits the property tax amount.)

In a dream world for homeowners, their property would get more valuable and they pay less in taxes. It does not often work this way so instead they may complain about having to pay more in the short term for the ability to gain more money down the road when they sell the property.

Consequences of the mansion tax in Los Angeles

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Los Angeles has a new mansion tax since April 1 and here are some of the consequences:

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Measure ULA adds a transfer tax of 4 percent for sales above $5 million and 5.5 percent for deals above $10 million; real estate transactions in the city below those levels pay the already-established transfer tax rate of .56 percent.

“The flurry of activity that happened up until April 1 was pretty phenomenal,” says real estate attorney Loretta Thompson, a partner at Withers Worldwide. “And then, of course, after that, people started pulling their listings. There’s been a quantifiable pause in anything that’s over $5 million. It chilled the market immediately, which was what everyone expected it would do.”…

There are some winners. Independent Los Angeles County cities like Beverly Hills and Malibu have become more desirable since the measure does not apply to them. It is also shifting the balance of power in luxury real estate, long a seller’s market. “Buyers are being picky right now,” says Nourmand, adding that some people are willing to wait in hopes that sellers bring down prices on mansions: “They feel they have the upper hand in the high-end market. They don’t feel like they have to rush — they think time is on their side.” James Corden, for instance, listed a Brentwood house in January for $22 million, then dropped it to $18 million before selling it in July for $17.1 million. According to Dirt.com, Corden’s sale is subject to nearly $1 million in taxes under the ULA Measure.

However, many hope the tax will be revamped or rescinded. With two lawsuits already challenging the measure, the City of Los Angeles finance director has been instructed to hold any monies received, rather than use them as planned to create affordable housing options in the city.

Will any of these consequences affect legal rulings? Whether this is allowable is a different kind of question compared to how it is working out in practice.

Will the new revenue effectively address affordable housing? At the moment, the revenue is tied up. But, put together taxes from several of these sales and some new housing units could emerge.

It will be interesting to see where the turning point in the market is. Wealthier homeowners will still want to buy and sell property. There will likely still be demand from those outside the region who want to move into these homes.

Celebrating property owners who hold on to their land even as development surrounds them

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The movie Up starts with a portrayal based on a true story: property owners continue to live in their home even as it becomes surrounded by new buildings. Their home is now isolated amidst change.

Here is a similar recent story from Australia:

https://www.facebook.com/7NEWSsydney/videos/790734838563206/

Their large five bedroom property with a sprawling 200 metre-long drive is located in The Ponds area in west Sydney, where hundreds of new homes have popped up in recent years…

The home looks bizarrely out-of-place wedged between identical chock-a-block newbuilds, where its 1.99 hectare garden could fit over 50 of the matching new homes inside.

However, when their neighbours upped and left – choosing to sell to the developers – the Zammits made a last hold out.

They refused to sell, despite being offered millions, and prevented the developers snatching up the last plot of land.

“The fact that most people sold out years and years ago, these guys have held on. All credit to them,” local agent Taylor Bredin told 7News…

In short, the land could be worth over £25million, especially after ten years of their private rebellion.

The valiant resident holds on to their land despite possible riches; all they have to do is move. Such a story fits the image of the sacrosanct property owner. A home is their castle. No one can tell them what to do. If they want to stay, they can stay. The government or private actors should not be able to move them.

At the same time, we believe growth is good. If even just a few property owners hold out, they can interrupt larger plans for new buildings and activity. Imagine an important highway project or mass transi line or new tall building that need several properties to make it better for others but those owners will not sell. Are there limits to whether a property owner can hold on?

In the Seattle story referenced by Up and in this Australian suburban story, developers could not force the issue but they could build right around them. Edith Macefield’s Seattle home was boxed in on three sides. The suburban property above is surrounded on all four sides by dense single-family homes. The property owner has stayed but the surrounding area has been radically transformed.

For now, the single-family home owner reigns supreme. That there are relatively few similar cases also tells us something. It is nice to hold on to a property but it is also nice to profit tremendously from selling it. Some may not like teardowns but the initial homeowner can make a lot of money. Housing and land is an investment. Few can hold out against the available money and resulting changes.

The most frequent homeowner regret about their home is not purchasing a bigger one

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A good number of Americans regret features of the homes they purchase:

More than half of all buyers have regrets about their purchase of a home, Trulia reports, and the No. 1 mistake buyers feel like they made is choosing the wrong size. Forty-two percent of those polled by the real estate site say that they picked a place to live that was either too large (9 percent) or too small (33 percent).

Almost the exact same number of renters, 41 percent, “wish they had bought instead.”

Twenty-six percent of buyers also wish they had done either less or more remodeling.

What might explain these regrets?

Buying a house is often the biggest purchase a person will ever make, so it’s natural that many experience some buyer’s remorse…

Home size has been a common gripe over the years, especially as housing gets more expensive and people have to settle for smaller spaces, said David Weidner, managing editor for Trulia’s housing economics research team.

Or are Americans so embedded within consumerism that they are always wishing for more? At the same time, expressing regrets about a major purchase doesn’t necessarily mean that people would have done it differently. If I like my home but wish the yard had more space, am I dissatisfied with owning my home? Not necessarily.

It is too bad we don’t get more information about how much bigger homeowners wish their home would be. Perhaps the average homeowner just wants another room to two to handle all their stuff as opposed to all Americans wishing to live in giant McMansions.

 

How much of their home do residents use?

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An op-ed opposing Los Angeles mansionization suggests owners of large homes don’t regularly use all that space:

In “Life at Home in the 21st Century,” UCLA researchers tracked 32 middle-class Angelenos, trying to measure and analyze how we live today. One family in particular they followed intimately, tracking how they moved around the house during the mornings, evenings, and weekends — when they were all home. The results were amazing: the family huddled around the kitchen and family room nearly all the time, leaving the living room, porch, and more than 50% of the rest of the first floor communal spaces almost entirely empty. The habit of gathering around the kitchen to eat, or huddling in front of the TV to watch, hasn’t changed much since the 1950s, but the average home size has — from 983 square feet in 1950 to more than 2,660 square feet today. Meanwhile, the average family size has shrunk and so has the average number of people living under one roof, from 3.3 in 1960 to 2.54 today.

See more about the book here. While the book appears to detail the heights of American consumerism (see this interview with one of the authors), it is interesting to consider how often rooms in a house are used. Are they really like office or store parking lots that tend to get used during certain work hours each day and then sit empty for more than half the day? Bedrooms operate that way during sleeping hours while gathering spaces – kitchens and family rooms – attract users in the evenings. Those hobby or storage rooms that are popular now – ranging from the man cave to a large closets – rarely see human activity. Could homes be made significantly smaller if the uses were combined or square footage was changed to reflect usage patterns? Or, should homes be built in a hub and spoke model around these key social spaces? On the other hand, American homes seem to privilege maintaining private spaces even if they aren’t used very much. The formal living room may be out but some homeowners seem to want private retreats (at least on TV, particularly in their bathrooms).

All of this gets back to you what homes are for in the first place. From decades ago to today, American homes often represent an escape from the outside world. A place to escape to with your family. A space where outsiders and the government cannot tread. Making such homes more communal is an interesting challenge when the homeowners need to be protected from forces outside the home.

The rise of the zombie mortgage titles

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Here is what happens if a bank decides not to go through with a foreclosure and the owner is stuck with a “zombie title“:

Since 2006, 10 million homes have fallen into foreclosure, according to RealtyTrac, a number that in earlier, more stable times would have taken nearly two decades to reach. Of those foreclosures, more than 2 million have never come out. Some may be occupied by owners who have been living gratis. Others have been caught up in what is now known as the robo-signing scandal, when banks spun out reams of fraudulent documents to foreclose quickly on as many homeowners as they could.

And then there are cases like the Kellers, in which homeowners moved out after receiving notice of a foreclosure sale, thinking they were leaving the house in bank hands. No national databases track zombie titles. But dozens of housing court judges, code enforcement officials, lawyers and other professionals involved in foreclosures across the country tell Reuters that these titles number in the many thousands, and that the problem is worsening…

Banks used to almost always follow through with foreclosures, either repossessing a house outright – known in industry parlance as REO, for real estate owned – or putting it up for auction at a sheriff’s sale. The bank sent a letter notifying the homeowner of an impending foreclosure sale, the homeowner moved out, the house was sold, and the bank applied the proceeds toward the unpaid portion of the original mortgage.

That has changed since the housing crash. Financial institutions have realized that following through on sales of decaying houses in markets swamped with foreclosures may not yield anything close to what is owed on them.

It would be fascinating to know exactly how many of these homes there are – and what the best solution to this issue might be. I remember the stories of homeowners who thought it was easier to simply walk away from their homes but it sounds like the banks have caught on and realized they might not make much from that situation either. It sounds like we need some guidelines to determine who is responsible for the home if no one, the homeowner, the lender, and perhaps even the community, doesn’t want it.

There goes the neighborhood, vacant suburban lot full of dandelions edition

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As I was walking near campus, I spotted a yard that may just be in many suburbanites’ nightmares: a vacant corner lot full of dandelions.

DandelionLawn

Granted, these dandelions might be temporarily in bloom but this is a potential disaster for many neighboring yards. Even worse, this yard sits at a corner on full display. Interestingly, the lot also contains a “for sale” sign. Does the sight of dandelions discourage anyone from purchasing it? Would it better to have a barren yard than this spectacle?

It can be hard and laborious to fight off the dandelion scourge if others around you don’t keep up. The picture isn’t quite wide enough to show it but there is a very clear line where the yard to the right begins because of the absence of dandelions. How long can that pristine yard to the right hold out? My neighborhood has some similar issues; when dandelions are in full bloom, on windy days the air can be full of white seeds blowing around. I’ve had to act as a dandelion vigilante, digging out the root at first sight of the yellow bloom. Until this point, I’ve been able to keep things under control without herbicide but that would be much more difficult if I lived next to this lot. Is there a proper etiquette or protocol to follow in order to get a nearby homeowner to tackle the dandelions in their own lawn?

And thus continues the battle between suburbanite and nature, man versus weed. When homeowners are not vigilant, all lawns can suffer.

(I think this issue is related to one I raised a few weeks ago: it may not be a pretty sight if everyone lets their dog use the common areas in a neighborhood for a restroom.)

The rise of granite countertops

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I’ve written about this before but more people are also interested in this topic: what is behind the rise in popularity of granite countertops?

“What’s interesting is how granite has quickly become the one and only material, across the country and across all price points,” says Ron Cathell, a real estate agent in Northern Virginia. It used to be a high-end thing, back in the 1990s when these countertops began making appearances. It was aspirational. “Then, 12 years ago, the first sort of moderately priced homes started using it. Now, every home has to have granite if you want to sell it. Not just sell it, but rent it. It’s become such a thing. It’s almost — ” he searches for the right metaphor. “It’s almost like trying to sell a house without a toilet.”

As the price has gone down, the popularity has gone up; just look at the graph provided by StoneUpdate.com, a Web site dedicated to the natural stone industry. In 2000, 895,000 metric tons of granite slabs were imported to the United States. In 2011, that number was 1.43 million — and that’s down from a high of 2.64 million a few years ago. The recession slowed granite sales — even cheap granite, which can be bought for as low as about $30 a square foot. Less cheap can go for $80, or however much you’re willing to spend, really. The backsplash is the limit.

“Let’s get deep, let’s get psychological,” says Anthony Carino. Carino is the co-host of “Kitchen Cousins,” a renovation show on HGTV, the network that taught the world about recessed lighting and radiant heating, that democratized the stainless steel appliance so it could be enjoyed by New Yorkers and North Dakotans alike. HGTV is the land that viewers visit when they are trying to cultivate a personal design aesthetic by spying on what everyone else is doing. “People wanting granite countertops is people wanting to sound like they know what they’re talking about,” Carino says. “It’s like listening to two guys talk about hot-rod cars.”

I would argue that this is not psychological – it is sociological. Granite countertops are in for three big reasons:

1. It signals something about its owners. Perhaps it is that they have the money (a marker of social class). Perhaps it is because they have the right taste (though whether it is about aesthetics or being functional would be interesting to look at). Perhaps it is because they are smart enough to get behind the latest trend (#2 on this list).

2. It is what is popular now, thanks to HGTV and other outlets. People want what is popular, partly because they don’t want to be left behind (like having Harvest Gold appliances) and partly because of #3.

3. It helps a home sell. Add stainless steel appliances and decent cabinets and you have a kitchen that is ready to help sell the house.

People internalize these important factors and then make a decision whether to purchase granite countertops or not.

A few other things intrigue me:

1. Are granite countertops “green” or “sustainable”? Does it matter?

2. I’ve seen a few references here and there to a backlash against people who buy this. One referred to purchasers as the “granite and stainless set.” Will this grow into a bigger movement and/or how long will the granite countertop popularity last?

3. Is part of the appeal the natural nature of granite? Although one could argue that it is strange to bring a big slab of rock into your gleaming kitchen…it makes for an odd mix of modern machines and prehistoric rock.

4. How do people sell other countertop surfaces these days if granite is so popular? Besides price, what is the sales pitch for something else?

Also, Megan McArdle recent wondered why people purchase stainless steel appliances.

h/t Instapundit