Sharon Whaley at Disclosure Source reminds me that Mello-Roos taxes are not fixed - they can rise, and sometime at significantly more than the 2% annual rate that applies to the base property tax rate. The home seller and agent have a legal responsibility to disclose the maximum amount that the Mello-Roos tax can reach, which is why it is critical to obtain a compliant Natural Hazards Disclosure (NHD) Report with a Mello-Roos determination from a reputable company!
Friday, June 26, 2009
Property Tax Info at Your (Cyber) Fingertips
While homes in Orange County are more affordable than they've been in years, there's a potentially expensive trap out there for the unsuspecting buyer.
Property Tax Basics
California's Prop 13, passed in 1978, capped property taxes at 1% of a home's value, and also limited the amount of increased assessment as a property's value rises to 2% per year. Of course, a home's value is reset each time it is sold, so no matter what the seller's property tax was, a home buyer can expect an annual property tax bill of 1% of the purchase price.
Sounds simple, but there's a catch. The "property tax" is not the only liability that shows up on your property tax bill. It may also include a wide array of "special assessments" for various voter approved bonds or other initiatives. The most notorious special assessment is the dreaded "Mello-Roos" Tax, which is typically a fixed amount rather than a percentage of the home's value. Mello-Roos taxes can range from a few hundred to thousands of dollars per year, while in some communities there are no Mello-Roos taxes at all.
What Will Your Tax Bill Be?
How can a buyer determine what the tax bill will be on a home he or she is considering buying? Obviously your Realtor should have this information at his or her fingertips, but it's at your fingertips too! Most counties make such information quickly available online, and Orange County's website is particularly easy to use.
The Orange County Treasurer/Tax Collecter Search Page allows you to search for a specific home by parcel number or address, as well as various other criteria. Once you've found the right home, you can "drill down" to see a summary of the tax assessment - but don't stop there. A the bottom of the page under the summary is a link in small text: "Click Here for Details". This is where the real meat and potatos are hidden.
A Tale of Two Cities
Let's take a look at the "details" for two home currently listed for sale - one in Misson Viejo, the other in Ladera Ranch.
28292 La Caleta in Mission Viejo is currently listed for sale for $699,990. Here are the tax details from the Tax Collector's website:
You can quickly substitue the assessed value of $447,754 with your purchase price to determine what your new tax bill will be, but what we're really interested in are the special assessments - those that are fixed amounts regardless of the value. In this case there are four special assessments totalling a whopping $33.81 per year.
30 Bedstraw Loop is a similar home located in Ladera Ranch, listed for $700,000. Tax details:
Mello-Roos rears it's ugly head - those two special assessments add over $4,500 to the annual tax bill, no matter what price you pay for the home! That effectively adds $375 to the monthly cost of owning the Ladera Ranch home.
Knowlege is Power
Obviously there may be many reasons a buyer would prefer a home in spite of a higher tax bill, but the key is to be aware of the difference in advance so that you can make a well informed decision and not face any unpleasant surprises late in the buying process.
Property Tax Basics
California's Prop 13, passed in 1978, capped property taxes at 1% of a home's value, and also limited the amount of increased assessment as a property's value rises to 2% per year. Of course, a home's value is reset each time it is sold, so no matter what the seller's property tax was, a home buyer can expect an annual property tax bill of 1% of the purchase price.
Sounds simple, but there's a catch. The "property tax" is not the only liability that shows up on your property tax bill. It may also include a wide array of "special assessments" for various voter approved bonds or other initiatives. The most notorious special assessment is the dreaded "Mello-Roos" Tax, which is typically a fixed amount rather than a percentage of the home's value. Mello-Roos taxes can range from a few hundred to thousands of dollars per year, while in some communities there are no Mello-Roos taxes at all.
What Will Your Tax Bill Be?
How can a buyer determine what the tax bill will be on a home he or she is considering buying? Obviously your Realtor should have this information at his or her fingertips, but it's at your fingertips too! Most counties make such information quickly available online, and Orange County's website is particularly easy to use.
The Orange County Treasurer/Tax Collecter Search Page allows you to search for a specific home by parcel number or address, as well as various other criteria. Once you've found the right home, you can "drill down" to see a summary of the tax assessment - but don't stop there. A the bottom of the page under the summary is a link in small text: "Click Here for Details". This is where the real meat and potatos are hidden.
A Tale of Two Cities
Let's take a look at the "details" for two home currently listed for sale - one in Misson Viejo, the other in Ladera Ranch.
28292 La Caleta in Mission Viejo is currently listed for sale for $699,990. Here are the tax details from the Tax Collector's website:
You can quickly substitue the assessed value of $447,754 with your purchase price to determine what your new tax bill will be, but what we're really interested in are the special assessments - those that are fixed amounts regardless of the value. In this case there are four special assessments totalling a whopping $33.81 per year.
30 Bedstraw Loop is a similar home located in Ladera Ranch, listed for $700,000. Tax details:
Mello-Roos rears it's ugly head - those two special assessments add over $4,500 to the annual tax bill, no matter what price you pay for the home! That effectively adds $375 to the monthly cost of owning the Ladera Ranch home.
Knowlege is Power
Obviously there may be many reasons a buyer would prefer a home in spite of a higher tax bill, but the key is to be aware of the difference in advance so that you can make a well informed decision and not face any unpleasant surprises late in the buying process.
Thursday, June 18, 2009
OC Median Price Up Again in May
Median Increases 3rd Month Out of 4
As reported in the Orange County Register, "By one measure, Orange County home prices increased for a third time in four months, perhaps indicating that housing is ricocheting off the bottom of the worst recession since the 1930s." The median home price rose about $20,000 to over $400,000. That's the same measure that they most frequently site, even though by their own admission, it is easily skewed by the number of homes sold in a given price range rather than actual price changes for a given market.
Price Per Square Foot
Let's take a look at what I feel to be a more accurate measure of actual market value, the sales price per square foot. In the same article linked above, the Register said "one local broker predicted that the price per square foot of Orange County homes could fall another 10 percent in the next nine months", but provides no further evidence or even explanation for why this might happen.
In 2006 Orange County's average price per square foot stood at $532, and it peaked in 2007 at $540, just before the 'bubble burst". Since then, there has been a steady and continuous decline to the bottom reached in February of this year at $246 per square foot - a drop of 53% over 2 years. That all seems pretty grim, but let's look at the monthly data:
The Good News
As you can see from the above chart, the average price per square foot for all homes sold in Orange County has held steady for 4 consecutive months at about $248. That flattening of the trend is not surprising considering the feeding frenzy for homes priced below $500,000, as well as the continual drop in available inventory. When was the last time that Orange County homes were selling for less than $250 per square foot? The first quarter of 2003! Prices are at a 6 year low, almost 50% of households can now afford to buy a home, the number of homes sold has increased year over year for 11 consecutive months, and interest rates continue to hover around 40-year lows.
The Time to Buy is Now
The message is clear - the current housing market represents a once-in-decades buying opportunity. First-time buyers may never see conditions this favorable, especially taking into account the Federal $8,000 Income Tax Credit. Investors have recognized the opening, and are bidding up lower priced homes with multiple all-cash offers.
The Move-Up Market
There's another group that has an excellent opportunity, and some are beginning to recognize it - homeowners with equity. Yes, they've taken a hit from the peak value of two or three years ago, but for those who didn't "cash out" the depressed prices and excess inventory of larger homes represent a unique chance to "move up". Let's say you bought your 1500 square foot home 8 years ago for $350,000 with 20% down. Through all the ups and downs, it's still probably worth $100,000 more than you paid, and your loan balance as actually fallen some. That $200,000 or so in equity represents the chance to buy a home in the $500,000 to $1,000,000 range at a time when such homes are priced at 6-year lows, and there are hundreds of motivated sellers to choose from!
As reported in the Orange County Register, "By one measure, Orange County home prices increased for a third time in four months, perhaps indicating that housing is ricocheting off the bottom of the worst recession since the 1930s." The median home price rose about $20,000 to over $400,000. That's the same measure that they most frequently site, even though by their own admission, it is easily skewed by the number of homes sold in a given price range rather than actual price changes for a given market.
Price Per Square Foot
Let's take a look at what I feel to be a more accurate measure of actual market value, the sales price per square foot. In the same article linked above, the Register said "one local broker predicted that the price per square foot of Orange County homes could fall another 10 percent in the next nine months", but provides no further evidence or even explanation for why this might happen.
In 2006 Orange County's average price per square foot stood at $532, and it peaked in 2007 at $540, just before the 'bubble burst". Since then, there has been a steady and continuous decline to the bottom reached in February of this year at $246 per square foot - a drop of 53% over 2 years. That all seems pretty grim, but let's look at the monthly data:
The Good News
As you can see from the above chart, the average price per square foot for all homes sold in Orange County has held steady for 4 consecutive months at about $248. That flattening of the trend is not surprising considering the feeding frenzy for homes priced below $500,000, as well as the continual drop in available inventory. When was the last time that Orange County homes were selling for less than $250 per square foot? The first quarter of 2003! Prices are at a 6 year low, almost 50% of households can now afford to buy a home, the number of homes sold has increased year over year for 11 consecutive months, and interest rates continue to hover around 40-year lows.
The Time to Buy is Now
The message is clear - the current housing market represents a once-in-decades buying opportunity. First-time buyers may never see conditions this favorable, especially taking into account the Federal $8,000 Income Tax Credit. Investors have recognized the opening, and are bidding up lower priced homes with multiple all-cash offers.
The Move-Up Market
There's another group that has an excellent opportunity, and some are beginning to recognize it - homeowners with equity. Yes, they've taken a hit from the peak value of two or three years ago, but for those who didn't "cash out" the depressed prices and excess inventory of larger homes represent a unique chance to "move up". Let's say you bought your 1500 square foot home 8 years ago for $350,000 with 20% down. Through all the ups and downs, it's still probably worth $100,000 more than you paid, and your loan balance as actually fallen some. That $200,000 or so in equity represents the chance to buy a home in the $500,000 to $1,000,000 range at a time when such homes are priced at 6-year lows, and there are hundreds of motivated sellers to choose from!
Monday, June 15, 2009
Industry Leaders Push Congress to Help Housing
The Housing Working Group of the Business Round Table recently released detailed recommendations for Congress and the White House aimed at jump-starting the housing market and the economy in general.
One key action the group is pushing for is expansion of the existing $8,000 tax credit for first-time buyers to a maximum $15,000 tax credit for all home buyers, with no income limitations, and the removal of several other restrictions.
Other recommendations of the group include:
One key action the group is pushing for is expansion of the existing $8,000 tax credit for first-time buyers to a maximum $15,000 tax credit for all home buyers, with no income limitations, and the removal of several other restrictions.
Other recommendations of the group include:
- Keep mortgage interest rates at historically low levels (below 5 percent) for at least one year
- Conduct a thorough review of current foreclosure mitigation and loan-modification programs in light of rising loan-modification re-default rates
- Make permanent the current temporary conforming loan limits
- Continue to review and strengthen government efforts already underway to review and refine mortgage lending practices
Tuesday, June 9, 2009
Where Have All the REOs Gone?
Check out this chart:
In January of this year, Bank Owned homes accounted for 44% of all the homes sold in Orange County. In May, that number had fallen to 31%, and the trend continues. Bank Owned properties currently make up only 4% of all homes on the market, and for the first week of June only account for 1 in 10 of the properties sold or placed in escrow for sale. RealtyTrac reports that foreclosures are still happening at a record pace, but they have not yet hit the market. The net impact has been a firming up of prices and intense competition for homes priced below $500,000.
| | Jan 09 | May 09 | June 09 | Active |
| All OC | 1,681 | 2,409 | 603 | 9,357 |
| Short Sales | 306 | 428 | 223 | 2,610 |
| Bank Owned | 736 | 743 | 60 | 417 |
In January of this year, Bank Owned homes accounted for 44% of all the homes sold in Orange County. In May, that number had fallen to 31%, and the trend continues. Bank Owned properties currently make up only 4% of all homes on the market, and for the first week of June only account for 1 in 10 of the properties sold or placed in escrow for sale. RealtyTrac reports that foreclosures are still happening at a record pace, but they have not yet hit the market. The net impact has been a firming up of prices and intense competition for homes priced below $500,000.
Sunday, June 7, 2009
First Time Buyer Information Page
Thinking about taking the plunge and buying your first home? We've created a new web page just for first time buyers. Check it out to learn some of the details of the Federal Tax Credit and the new CAR Mortgage Protection Plan. You can also visit our Home Buyer's Quick Start page.
Wednesday, June 3, 2009
Low End Hopping - High End Slow
Say, the topic of discussion on this OC Register blog sure sounds familiar....
Here's a quote from the Insider Update newsletter we sent out this month:
Want a copy? Just shoot me an email or register at www.leslieeskildsen.com.
Here's a quote from the Insider Update newsletter we sent out this month:
It's been a wild ride for Real Estate over the last two or three years, but there are some signs that the market is beginning to stabilize. Although the much-reported Median Price continues to drift downward, homes are selling at a faster clip - April was the 13th month in a row of year-over-year sales increases.
One big reason the median price is still dropping is price pressure and less activity on homes over $500,000. Homes priced above the $1,000,000 mark are selling slowly, but for those priced under $500,000 it's an entirely different story. Buyers in that price range are faced with a defacto "seller's market" - reduced inventory, multiple offers, offers above asking price, and intense competition for Bank Owned and "Equity Sellers", as opposed to Short Sales. A few months ago, Bank Owned and Short Sale homes each made up about one-third of the homes for sale, but those REOs are almost gone. Rumours abound of a coming wave of new foreclosures and Bank Owned properties to hit the market, but for now there aren't many to be had.
Want a copy? Just shoot me an email or register at www.leslieeskildsen.com.
Use Your Tax Credit to Lower Closing Costs!
First-time home buyers got another boost from HUD last week, when it was announced that buyers who qualify for a one-time tax credit of up to $8,000 can now apply that credit towards closing costs on an FHA loan, or to increase their down payment from the required 3.5%.
Thinking about taking the plunge? Check out our home buyer's quick start tips!
Thinking about taking the plunge? Check out our home buyer's quick start tips!
Monday, June 1, 2009
Real Estate Activity for May 2009
Check out the latest Real Estate activity for the month of May:
Saddleback Valley (Coto, Rancho Santa Margarita, Mission Viejo, Trabuco Canyon, Ladera Ranch, and Lake Forest)
Coto de Caza
Rancho Santa Margarita (including Dove Canyon, Rancho Cielo, Robinson Ranch, Wagon Wheel, Las Flores, and Walden)
Mission Viejo
Saddleback Valley (Coto, Rancho Santa Margarita, Mission Viejo, Trabuco Canyon, Ladera Ranch, and Lake Forest)
Coto de Caza
Rancho Santa Margarita (including Dove Canyon, Rancho Cielo, Robinson Ranch, Wagon Wheel, Las Flores, and Walden)
Mission Viejo
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