Edwin Baloloy

April 1, 2014 by Edwin Baloloy

How’s the market? Different year, same pattern…

North Orange County - Expect the same cycle every year -- unless something drastic happens — North Orange County – Expect the same cycle every year — unless something drastic happens

If 2014 follows the same pattern as 2013 (and any year before that), you can expect the following to happen:

– Inventory will continue to gradually rise until the fall season

– The peak of activity (homes selling) will be between April and August.

– Home sales will decline after August

If you’re like most homeowners, you’re excited about your increased equity. Many homeowners who were barely “break even” or upside down with their loan are now wondering if they’ll have enough after selling to apply toward a downpayment. As values continue to rise and the economy improves, look for an increased number of “move-up” homeowners looking to sell their existing home to purchase a larger one.

Here’s the California Association of Realtors (CAR)’s forecast for 2014:

After a huge surge in prices in 2013, this year looks to be more moderate.

Keep in mind that we are already 1/4th into 2014. As multiple offers fuel rising values, look for an uptick in supply from the move-up sellers who’ll likely sell contingent.

The big difference between 2013 and 2014? Don’t expect prices to go up 28% in California. As the chart above shows, CAR expects a 6% gain.

March 18, 2014 by Edwin Baloloy

What exactly is “Mello Roos”? How much is it in Blackstone and La Floresta in Brea?

Before we get into what Mello Roos is, let’s look at some of the amounts published by builders in Blackstone and La Floresta in Brea:

Emerald Heights by Shea Homes: $976.43 for Plan 2 & 3; $1,226.43 for Plan 4

Coral Ridge by Shea Homes: $1,226 for Plan 1 & 2; $1,412.76 for plan 3

Paseo by Standard Pacific Homes: Amount not published. The brochure states “approximately 1.13%.” I estimate the amount to be about $728 when working backwards form the sales prices and likely will be higher or lower depending on floor plan purchased.

Ventanas by Van Daele: Approximately $800 depending on homesite

Avenida by Standard Pacific Homes: $800 per year depending on homesite

What exactly is Mello Roos?

The term itself comes from The Community Facilities Act of in 1982 authored by Senator Henry J. Mello and Assemblyman Mike Roos. The Act created “CFDs”, or Community Facilities Districts which are established by local government agencies to raise community funding.

In other words, it’s a way for a builder to finance the infrastructure needed to create a new development. This is commonly done through selling bonds. The duration of the Mello Roos depends on the life of the bond. In some areas of Placentia near Champions Sports Complex, the bonds were for 15 years.

Sample tax bill from a residence in "Stadium Lofts" in Anaheim — Sample tax bill from a residence in “Stadium Lofts” in Anaheim

From the tax bill above, you’ll see the “basic levy rate” of 1%. In California, this is the base tax rate for a property. North Orange County cities are typically about 1.03% to about $1.15% in communities that “don’t have Mello-Roos.” In Real Estate lingo, while it’s not technically correct, having Mello Roos is any amount significantly above that range. In the bill above, you can see that CFD’s are inline with normal bonds.

However, there’s a line item only described as “other services” for an additional $2053.44! This amount is not technically “Mello Roos” per the definition above.

Confused?

That was intentional. Don’t worry — you don’t have to be an expert on Mello Roos when buying a home. (However, your Real Estate agent and CPA should know the difference.) What’s important is to know is if the total tax exceeds the normal rate in the area. Once it does, sales data shows it will affect the sales price of a home. Since it boils down to monthly payment for most buyers, the effect is similar to HOA dues.

So, next time you want to irritate your friends on the subject or Real Estate and someone asks, “How much is the Mello Roos in that community?” You should answer, “The question you should be asking is: How much are the additional bonds and assessments above the base tax rate?“

March 13, 2014 by Edwin Baloloy

Highlights of a Contingent Listing – Is it for you?

Before you put your home on the market, find out which option is best for your comfort level.

As homeowners are becoming pleased with their equity, the possibility of selling their home in order to buy often results in confusion.

How do most make the transition?

Since the buying side of your transition is obviously the tougher feat in today’s seller’s market, it usually would be best to purchase your replacement home first.

If you’re like most, this isn’t possible because the equity in your home is needed for a downpayment. For those who are worried they won’t find a home and be left scrambling after their home is sold, they often sell “contingent.”

This video shares some of the highlights of selling contingent:
[youtube http://www.youtube.com/watch?v=9O22hsi7P_Q?rel=0]

For a summary on the other options, read my previous blog.

March 12, 2014 by Edwin Baloloy

Is the Affordability Index becoming less relevant in an International Market?

Even in communities that were predominately white in North Orange County, Asian buyers have been increasing.

As mentioned on several of my prior blogs, Chinese buyers for North Orange County continue to dominate new construction and the high end market.

During the boom of 2003-2006, subprime lending fueled bidding wars as home prices reached levels where it was impossible to afford a nice home on a 30 year fixed mortgage — unless you were a Doctor, Lawyer or Executive of a company.

This time around, low interest rates, former homeowners who had a foreclosure or short sale seeking to purchase, low inventory, and increasing international buyers are pushing prices upward without an end in sight.

Before subprime and International Buyers, prices had to be inline with local wages.

With International Buyers continuing to purchase, is the Affordability Index becoming less relevant?

As international buyers flood the market, do we need an international affordability index?

Here are a few significant stats from the Bloomberg Report below:

– The amount of millionaires in China have more than DOUBLED since 2008

– 60% of Chinese with $1.6M or more in assets are in process or considering emigration with the #1 destination (40%) being the U.S.

– Reasons for emigration: Children’s Education 58%, Wealth Safety 43%, Retirement 32%

– According to the Department of Homeland Security, Chinese ranked 2nd to Mexicans for receiving legal, permanent residency.

[youtube http://www.youtube.com/watch?v=J-ZZHQVZWLY?rel=0]

Recently, I observed a builder’s release at Coral Ridge in Blackstone. My client and I realized that the prices had gone up almost $200,000 from the last release. Almost everyone in the room were Chinese and eyeing one lot that sold for almost $1.6M.

A crowd gathers for Shea's release for Coral Ridge. — A crowd gathers for Shea’s release for Coral Ridge.