How the tax bill potentially will affect homeowners

This past weekend, the GOP passed its tax plan along party lines, despite heavy opposition against it in CA. I was wondering how the new plan might affect homeowners, and my friend Jay Vorhees at JVM Lending had the perfect answer. See his summary below!

The bill has a provision to cap the mortgage interest deduction to loan amounts of $500,000 or less. To be clear, borrowers will not be ineligible for the mortgage interest deduction if they owe more than $500,000; borrowers will only be able to deduct interest that accrues against $500,000 of their mortgage, no matter how large it is. Here are some observations:

1. Only 5% of all mortgages are over $500,000. And the vast majority of them are in California. Hence, it is unlikely that we Californians will get a lot of sympathy from middle America. But this also explains why there is so much concern in California.

2. How much will it actually hurt borrowers? For a $1 million home (not a lot in coastal California) with 20% down, a borrower will have an $800,000 mortgage. This means that $300,000 of that debt will be ineligible for the mortgage interest tax deduction. If the interest rate is 4%, the borrower will not be able to deduct $12,000 of interest from his or her income for tax purposes. If that same borrower is in a 40.5% combined tax bracket (33% Federal, and 7.5% State), he or she will lose $4,860 in direct tax savings. That is real money for anyone.

3. Current borrowers will be grandfathered, meaning they will be able to continue to deduct interest against a $1 million mortgage (or $1.1 million if they have an equity line). This provision will likely hurt inventory, as this will create another disincentive to sell. 

4. Standard Deduction Doubling: This is the bigger issue for real estate in general, as most lenders and Realtors aggressively sell the tax benefits from buying a house. If the Standard Deduction for married couples doubles to $24,000, most taxpayers will not be eligible to take advantage of the mortgage interest deduction (it would only make sense if their mortgage interest and other itemized items exceeded $24,000; a $500,000 loan at 4% would only accrue $20,000 of interest). 

5. The real estate lobby is extremely powerful. This is the biggest factor of all. The real estate lobby (that includes builders) is exceptionally powerful, and most of the lobby is opposed to the above-referenced provisions.

I always find Jay’s perspectives insightful with helpful information. Jay wrote this prior to the bill being passed by the Senate. Now that it has been passed, here are a few of my own observations:

  1.  There is a lot of jockeying of blame between the two parties (status quo).
  2.  If it was so negative, why did the Senate Bill get passed so quickly?
  3. The Senate and House will now go back and forth on all the details to get final approval before it goes to President Trump. Changes can still be made or it could possibly fall apart.
  4. Back to Jay’s last point – there is a very strong lobby that still can push change.
  5. I see this continues creating a disincentive for people to sell. It used to be that on average people moved every 7 years; that number has now increased to approximately every 20 years, thus the continued low inventory.

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Road Trips: Carmel

For all the beautiful, picturesque landscapes in California, it seems like the Central coast can often be overlooked. Everyone knows about the National Parks, Lake Tahoe, San Francisco, the SoCal beaches, etc. But one of the best gems of the entire state is just a couple hours South of the East Bay!

If you’ve never taken a trip down the Pacific Coast Highway to reach the 17-mile drive through Carmel and Monterey, you don’t know what you’re missing! You’ll hit miles of stunning coastline, as well as some of the cutest inland towns you can imagine.

One of my favorite day trips is a jaunt down to Carmel. I love all the little shops, restaurants and the beautiful beach to enjoy the Pacific Ocean at sunset. Carmel is also very dog-friendly – it seems that everybody has a dog and they are free to run on the beach (where most gravitate to the right side). I have even gone to a Weimaraner gathering here. Anybody who has rescued a Weim from NorCal Weim Rescue gets an invite. It is a fun sight to see: a bunch of Weimaraners playing and frolicking in the waves.

Monterey and Carmel also have a great wine scene and amazing golf. It’s such an easy trip, and so close to home. I recently did the 17-mile drive; that was a first for me after all these years and definitely worth the money and scenic stops. Now might be the perfect time to go, too. It is Fall, so the leaves will be brilliant and the weather will be perfectly crisp…a perfect day for a stroll on the beach, as long as you are bundled up and there is no fog!

 

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How to send help to the fire victims

Last week, a record-setting wildfire decimated the picturesque Napa, Sonoma and Santa Rosa areas. There are 40 people dead, at least 16 wineries destroyed, thousands homeless and hundreds still missing.

via PressDemocrat.com

It is one of the most gruesome, saddening natural disasters in California history. If you’re like me, and want to help out the victims of these fires and do whatever you can to restore those areas to their former selves, there are plenty of ways to donate.

One way is to send a box of fresh fruit and vegetables from Farm Fresh to Redwood Empire Food Bank. So far, they’ve donated more than 200 boxes to evacuation centers throughout Sonoma and Mendocino Counties.

For every box donated to Redwood Empire Food Bank, Farm Fresh to You – who we wrote about last week – will match that donation. Just click here if you’d like to help. I did and when I don’t want a box delivered to my house, I will click to donate.

There have also been numerous drives and charities springing up on social media in the wake of the destruction. One specifically mentioned on the TV briefings was Napa Valley Community Foundation. Or if your heart is with helping all the animals, Jameson Animal Rescue Ranch is an Amazon Smiles recipient.

 

 

 

 

 

These give assurances that your donation is going where it will be most useful. If you don’t want to get involved with those, many who have friends and family that have lost everything are taking up carloads of specific donations.

My friend’s parents and sister both lost their houses and she specifically asked for certain sized clothes and non-perishables. I rummaged through my home for clothes and supplies, plus gave a gift card to Trader Joe’s.

In the news briefing, they specifically requested to temper our donations, meaning they will still be needed two months from now, so maybe one day in the near future when you are feeling grateful for all that you have, you might think, “I would like to click on one of these links and donate $25.”

Happy Buyers!

I recently helped Maria and Kehl find a new home as they were relocating to the Bay Area! It was an awesome process working with two California newbies, and I couldn’t be happier for them.

They left Houston just in the nick of time, but what has struck them most is how friendly people are here. Initially, they did not want to be in the downtown area of Martinez, but still wanted to be close to the Shell refinery. They ended up staying three months in an AirBNB in downtown Martinez and came to love the proximity to work, the easy and quick access to open space and all the fun things Martinez has to offer. It is a changing downtown area as the city is incorporating more events and family-friendly activities.  Even their lender came to their signing – thanks, Sean!

Check out this nice Zillow review they left me:

You could be next! Contact me at kristin@lanham.com if you’d like to buy or sell a home in the East Bay!

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Open House: 4391 Pembroke Dr. (Concord)

The Kristin Lanham Team has another beautiful home going on the market – this one is in Concord, on Pembroke Dr. Take a look at some of the pictures below, and swing by for a peek at our Open House this weekend!
 
The home is a cozy, mid-century charmer with a serene, quiet backyard. There is room for an RV or a boat, which includes a spa and storage shed, all surrounded by professional landscaping and lots of plants and flowers.
An open concept makes it warm and welcoming. The updated kitchen with its expansive island is the centerpiece for family gatherings and additional storage. The open-beamed ceilings add to the interior charm. There are stylish updated bathrooms, dual-pane windows, lots of natural light and great flow from outdoor to indoor for entertaining.
 
This house has been meticulously loved – an updated, warm interior and a vibrant backyard planted specifically to attract hummingbirds, butterfiles, and bees.  A perfect place to call home!
Come take a look at the Open House this weekend from 1-4 p.m. on both Saturday (9/9) and Sunday (9/10)!
3 bedrooms | 2 baths | 1250 sq. ft. |.17 acre lot
Offered at $580,000
To take a virtual tour of 4391 Pembroke Dr., click HERE!

What is the most expensive zip code in CA?

If you had to guess which California city has the most expensive real estate, what would you say? San Francisco, maybe? Certain parts of Los Angeles – remember the show 90210?
Watkins-Cartan House, 98 Alejandra Ave., Atherton, CA
Nope, the honor goes to the 94027 zip code – Atherton, CA. For those not familiar, Atherton is right above Palo Alto and the average cost of a home there is…wait for it…$6.17 million. According to Zillow, home values in Atherton reached a low point in summer 2009, dipping below $3 million.
I asked my friend Jay Vorhees of JVM Lending what kind of average income would be necessary to afford a home in Atherton at 25 percent and 50 percent down.
Given that the average income in Atherton is about $250,000, I was wondering how exactly a median home price of $6.17 million was affordable there! Here’s his assessment:
Assuming no consumer debt, a 4.0% rate and a 42% debt ratio, with 25% down, PITI would be about $29,000 per month (rounded). This would require $69,000 of monthly income or $828,000 annually.
With 50% down, PITI would be about $22,000 per month (rounded). This would require about $52,500 of monthly income or $630,000 annually.
So how does the average income earner in that area afford Atherton? Most likely people have had these homes for years, thus the lower income. For new purchases, stock options from IPOs are not usually included in your annual income, thus allowing the the nouveau riche of Silicon Valley to buy with cash or put 50% or more down.

Tips for surviving the next drought

Last winter, the rains were plentiful. This spring and summer, the rivers have been gushing, lakes have been full and waterfalls have been crashing.

It’s a scene we haven’t had in the Bay Area in quite some time. But since the drought ended, all the regular water usage has returned – flushing normally, watering our gardens more than once a month, leaving the water going occasionally and not worrying about it…

That said, we’re still in California and we’re still in an accelerated state of global warming (according to most climatologists, anyway). So, there will be another drought. Here are some Bay Area-specific tips from the Contra Costa Water District (CCWD) for surviving the next one:

Know your water provider’s Drought Program and its requirements

Every water provider should have a Drought Program. Contact them to make sure you know what their requirements are, ahead of the next drought. If you have CCWD, you can sign up for their newsletter to get updates.

Know how much water you are using

You can read your water meter to better understand how much water you’re using. However, that can be tricky. Here are some tips on CCWD’s website: www.ccwater.com.

Check for leaks

You can also utilize your meter to check for leaks. One of the most common leaks and wastes of water comes from the toilet. Check regularly!

Use efficient fixtures and appliances

You should always get EnergyStar appliances if possible, and you should have a toilet with 1.28gpf or less. Check if yours does at www.map-testing.com. Also, make sure your laundry loads are always full and don’t leave faucets running!

Convert lawns to gardens

Some water providers offer rebates for converting a lawn to a garden. For example, CCWD offers $1 per square foot of lawn converted ($1,000 maximum residential, $20,000 maximum Commercial/HOA). And California will give you a state rebate for front and back lawn conversions as well. Plus, it just looks prettier!

If you irrigate, do it efficiently

If you irrigate or have sprinklers, make sure the system is in good shape (no blocked or broken heads) so there’s no water waste. Try to water after the sun goes down or before it goes up to avoid evaporation. And turn the system off when rain is coming.

There are a million different simple ways to avoid water loss when the next drought occurs. Water is a still a precious commodity!

Art Town: Fantasy

This graceful, curving sculpture is located on the corner of Mt. Diablo and California. To me, it always looks like it’s in constant motion. And the shape even reflects the curved surface of the office building just north of it.

IMG_1185

This piece, named “Fantasy,” was built in 1990 by Louis Pearson, and uses polished stainless steel to create the mesmerizing shape. Don’t forget about today’s Art Walk downtown!

Even though Fantasy won’t be included on this specific walking tour, you can always check it out on your own. Hope to see you there!

California getting snotty about their potties

Did you know California has put a new law in place that went into effect on Jan. 1 of this year? It’s causing quite a commode-tion.
It basically says that any home built after 1994 must flush away some money meeting the requirement of having water-conserving plumbing (WCP) fixtures in their bathrooms, whether it’s going on the market or not. What a stinker!
Additionally, the law calls for installation of WCP fixtures – and wiping away the old one – when the existing plumbing fixtures use more than the following:
  • Any toilet manufactured to use more than 1.6 gallons of water per flush.
  • Any urinal manufactured to use more than one gallon of water per flush.
  • Any shower head manufactured to have a flow capacity of more than 2.5 gallons of water per minute.
  • Any interior faucet that emits more than 2.2 gallons of water per minute.

Now that the drought is over, I wonder if the regulations might go down the drain and on the sale side nobody is enforcing it. But either way, a very important question remains: who the heck has a urinal in their house?

Road Trips: Scenic Drives in Northern CA

Nothing can top the beauty of Northern California. From the ocean, to the mountains, to lakes, rivers and cities, the Bay Area is one of the most breathtaking places in the world.

California Redwood Road Trip

We have officially kicked off the summer season, the rain has stopped and given NorCals mild summer weather, it’s a perfect place to explore, especially during these upcoming months. I’m a big fan of road trips – there’s nothing like hopping in the car, rolling the windows down and going for a drive on a warm summer day.

With that in mind, I found a great article on OnlyInYourState.com listing 11 great scenic drives in Northern California. I’ll list a few of my favorites out below for reference, but take a look at the full list, and then take a trip!

1. Volcanic Legacy Scenic Byway – Lassen National Park

2. Yuba Donner Scenic Byway – Tahoe National Forest

3. Emigrant Trail – Tahoe/Donner Area

4. Route 101 Redwood Highway – Del Norte Redwoods State Park

5. Carson Pass – CA/NV Border

Happy Trails and have a great summer!