Category Archives: California

What Happened To The $1 Billion Tax Revenue Expected From Licensed Marijuana Sales In California?

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A customer shows his receipt for recreational marijuana in Berkeley (KTVU.com).

$1 billion: that’s how much California initially anticipated receiving in annual tax revenue by legalizing the sale of recreational marijuana. Here’s what actually happened:

  • CA will likely bring in just under $500 million in marijuana tax revenue this fiscal year.
  • That’s lower than the $630 million forecasted in former Governor Jerry Brown’s budget.
  • Current Governor Gavin Newsom’s new budget projects the state will generate $355 million in marijuana excise taxes by the end of June according to press accounts.

That is worse than underwhelming. Consider that Washington State received $319 million in legal marijuana taxes and license fees in fiscal year 2017, while Colorado collected $247 million in 2017. They have populations of just 7.5 million and 5.7 million respectively. California is the largest US state with nearly 40 million people.

Why is this important? There was a wave of Democratic gubernatorial candidates that ran on legalizing recreational marijuana to boost state tax revenue in the last midterm elections. Many of them won and are trying to pass a bill through their state legislatures as soon as this year. These include: New York, Illinois, Connecticut, Minnesota, New Mexico, and New Jersey.

If new states want to legalize retail cannabis sales and meet their respective tax revenue goals, they need to heed the lessons of California and public equity investors in the space likewise should understand the issue as they assess the size of the addressable market here. Marijuana legalization in the US is far more complex than either group likely realizes.

With that said, there’s three major issues at play in California:

#1 – The taxes are too high, allowing the black market to remain relevant. Fitch predicted this consequence in 2017: “California’s high cannabis taxes will encourage black market sales and limit potential local government revenues from this new market… Effective tax rates on nonmedical cannabis will be as high as 45% when accounting for both state and local levies… By comparison, Oregon taxes nonmedical cannabis at approximately 20% and Alaskan taxes range from 10% to 20%.”

The upshot: Colorado, Washington and Oregon all had to reduce their marijuana tax rates after legalization to better compete with the black market. California should follow suit, but other states should learn and get it right out of the gate.

#2 – California may have legalized the sale of retail cannabis, but most cities still prohibit it. Fewer than 20% of cities in the state allow stores to sell recreational marijuana (89 out of 482). For example, 93% of Los Angeles County’s 88 cities ban retail sales. One solution that’s supposed to go into effect: businesses will be allowed to deliver anywhere in the state aside from public land in the hopes that people use those services rather than buy from the black market in communities where they don’t have access to legal adult-use sales.

#3 – The regulations are too onerous and complicated. There are a lot of problems here, so we’ll just highlight a couple.

  • The Bureau of Cannabis Control has issued about 550 temporary and annual licenses to marijuana retail stores compared to initial projections of upwards of 6,000 in the first few years. To put this in perspective, the Los Angeles Times reports that “some 1,790 stores and dispensaries were paying taxes on medicinal pot sales before licenses were required starting Jan. 1.”
  • Why haven’t they issued more licenses? Marijuana businesses need a local license before getting one from the state. That’s tough to do when retail sales are banned in most cities. Obviously, this is not an issue for the black market, which is not restricted by location or burdened by regulatory and compliance costs.
  • Moreover, California’s marijuana market is still governed by a slew of emergency regulations. The Bureau of Cannabis Control, California Department of Public Health and California Department of Food and Agriculture have tweaked these regulatory provisions over the past year, and are still working on final non-emergency regulations to adopt. In the meantime, marijuana businesses have been left confused and forced to adapt to regulatory changes, such as different labeling requirements on marijuana products.

To sum up, we’ve covered the legal retail marijuana industry since its infancy five years ago and remain enthusiastic about its prospects. That said, California is a key example of how the same regulations that made the recreational cannabis market possible can also hurt its growth. The right deregulation will ultimately drive growth rates for the industry and valuations for public pot companies over time. This is why it is taking so long for New Jersey, for example, to legalize retail marijuana sales through its state legislature. Lawmakers have the benefit of learning from states like California that missed the mark, even with the tailwind of an entrenched medical market with existing infrastructure and a distribution pipeline.

The bottom line for investors in public pot stocks: pay attention to state and local tax rates and regulations as new markets open up because this under appreciated factor will profoundly affect the industry’s total addressable market.

Source: ZeroHedge

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The “Failing Angels” Are Back

Lehman, WorldCom And Now PG&E

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(ZeroHedge) One week ago when we wrote that with PG&E facing a threat of an imminent bankruptcy (which we now know will soon be realized), the most bizarre development in this latest corporate fiasco was that until the first week of January, both S&P and Moody’s had rated the California utility with over $30 billion in debt as investment grade even as its bonds and stocks were cratering ahead of what investors deemed to be an imminent Chapter 11 filing.

And while we have extensively discussed the multi-trillion threat posed by “falling angel” companies, or those corporations rated BBB – the lowest investment grade equivalent rating – as they slide into junk territory, the recent events surrounding PG&E highlight an even greater blind spot in the corporate bond arsenal: that of the failing angel.

As Bank of America’s Hans Mikkelsen wrote in a recent research note, Investment Grade defaults – defined as defaults within one year of being rated IG – are “rare and unpredictable” (even if in the case of PG&E, its downfall was quite obvious to many) as globally in more than half of years historically there were no HG defaults at all.

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As such, Monday’s pre-announcement by The Pacific Gas and Electric Company (PCG) that it intends to file Chapter 11 by January 29th…

https://www.zerohedge.com/s3/files/inline-images/PG%26EBOFA2.jpg?itok=LPUASg8i

… is a singular event and if the company follows through, it will become the third largest IG default since 1999, behind Lehman and Worldcom, with $17.5bn of index eligible debt.

The chart below lists all US index defaults since 1999 that occurred within one year of being included in ICE BofAML benchmark US high grade index. The three largest defaults in terms of index notional were Lehman ($34.9bn), WorldCom ($22.9bn) and CIT Group ($12.4bn).

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In fact, as BofA adds, if PG&E does file before the end of the month the company will become a member of a much more exclusive group of “Failing Angel”, formerly-IG companies consisting of Enron, Lehman and MF Global that defaulted directly out of IG, before making it into the HY index as Fallen Angels.

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Ironically, as Mikkelsen adds, until recently he had looked at PCG as set to become a large Fallen Angel from BBB accounting for 1.4% of the HY market. Now it appears the company plans to bypass the HY market, and proceed straight to default.

So as the world obsesses over the risk of “falling angels”, just how many other “failing angels” are hiding in the shadows, waiting for their moment to wipe out billions in stakeholder value as the economy continues to slowdown to what is now an inevitable recession, and just what will the knock-on effects of this “historic” default be? We will find out in less than two weeks.

Source: ZeroHedge

Proposition 13 Is No Longer Off-Limits In California

https://s.hdnux.com/photos/75/11/15/16028529/7/gallery_xlarge.jpgGov. Jerry Brown, left, with Proposition 13 co-author Howard Jarvis at a news conference in July 1978, one month after California voters passed the measure. Photo: ROBBINS / AP

Proposition 13 Is Untouchable.

(San Francisco Chronicle) That’s been the thinking for 40 years in California. Politicians have feared for their careers if they dared suggest changes to the measure that capped property taxes, took a scythe to government spending and spawned anti-tax initiatives across the country.

However, that is beginning to change. With Republican influence in California on the wane and ascendant Democrats making tax fairness an issue, advocates are confident that the time is right to take a run at some legacies of the 1978 measure.

High on their list: making businesses pay more and ending a sweetheart deal for people who inherit homes and their low tax bills, then turn a profit by renting them out.

Legislative Democrats hold so many seats that they don’t have to worry about the GOP blocking such ideas from going before voters. Gov.-elect Gavin Newsom has said that “everything would be on the table,” including Prop. 13, as he formulates a plan to reform the state’s tax structure.

Perhaps most important, Prop. 13’s age is becoming an advantage to would-be reformers: California’s voting demography is changing. The generation of homeowners that grew up with Prop. 13 is well into retirement now, and some younger Californians blame flaws in the measure for everything from the under funding of public schools to growing wealth inequality.

“For Californians who grew up in the public education system that came after Prop. 13, their education was robbed from them. They didn’t get the same education their parents did,” said Catherine Bracy, executive director of TechEquity Collaborative, which is trying to rally the tech community to support changes to the state’s tax structure.

Bracy, 38, moved to the state six years ago from Chicago. “For newcomers (to California) like me, who were born after Prop. 13, we want to experience the California dream, too,” she said. “But we don’t have the opportunity to, because all the goodies have been locked up by the older generations.”

Prop. 13 was a remedy for a side-effect of one of California’s first housing bubbles — spiking property taxes. Moved by their own tax bills and horror stories of longtime homeowners being forced to sell because of skyrocketing assessments, voters overwhelmingly passed the measure. It rolled back assessments for homes and businesses to 1976 levels and capped annual tax increases at 2 percent.

Jon Coupal is president of Prop. 13’s fiercest defender — the Howard Jarvis Taxpayers Association, named after the initiative’s co-author. He agreed that “the number of homeowners who were around in 1978 is shrinking. And many younger people don’t remember the fear and anger about losing your home.”

But Coupal said that “notwithstanding the leftward movement of politics in California,” his organization’s internal polling shows support for Prop. 13 remains strong. And a survey in March by a nonpartisan group unaffiliated with Coupal’s organization, the Public Policy Institute of California, found that 65 percent of likely voters surveyed said Prop. 13 “turned out to be mostly a good thing for the state.”

Under Prop. 13, residential and commercial property alike is reassessed only when it is sold. But while homes often change hands every few years, many large businesses remain in the same ownership for a long time. Some businesses are paying property taxes based on assessments that haven’t changed in 40 years.

That’s one main target of people who want to tweak Prop. 13. The League of Women Voters of California says it has gathered enough signatures for a 2020 ballot measure that would create a so-called split roll system, under which businesses’ property would be reassessed every three years. Agricultural land and businesses with 50 or fewer employees would be exempt. Residential property would not be affected.

The change could raise $11 billion in tax revenue statewide, including $2.4 billion for Alameda, Contra Costa, Marin, San Francisco and San Mateo counties, according to a January study by the USC Program for Environmental and Regional Equity. The study found that 56 percent of all Bay Area commercial properties had not been reassessed for 20 years, and 22 percent had assessments dating back to the 1970s.

Could a split-roll measure pass? It might be close. Forty-six percent of likely voters surveyed by the Public Policy Institute of California in January said they supported the idea, while 43 percent were against it. Support was far higher among likely voters under 35 (57 percent) than with those over 55 (41 percent).

However, the split-roll concept has actually been growing less popular over the years, the institute said: Six years ago, 60 percent of likely voters backed it.

Helen Hutchison, president of the League of Women Voters of California, acknowledged that changing the law will be difficult because “Prop. 13 still has some kind of magical pull. But we think the time is right to do this.”

https://s.hdnux.com/photos/77/52/12/16687798/5/940x940.jpgState Sen. Jerry Hill has introduced a ballot initiative that would limit a tax break for heirs of residential property. Photo: Max Whittaker / Getty Images 2009

So does state Sen. Jerry Hill, D-San Mateo. He has introduced a ballot initiative that would tweak a different part of Prop. 13’s legacy.

Hill’s proposal, Senate Constitutional Amendment 3, takes aim at Proposition 58, which voters approved in 1986. The measure allowed parents to give their residential property to their heirs without triggering a tax reassessment. The intent of the measure was to insulate children from absorbing a huge spike in property taxes and help them stay in the family home. California is the only state to offer this tax break.

Hill proposed the change after learning that many heirs are using their inherited properties as second homes or renting them out for many times more than what they’re paying in Prop. 13-controlled property taxes.

The proposed ballot measure would require people who inherit property in this way to move into the home within a year if they wanted the property tax break. The change would apply to future heirs, not those who have already inherited homes.

Getting this measure on the ballot in 2020 requires Hill to corral a two-thirds majority from both houses of the Legislature. If it makes it to the ballot, it could be passed by a simple majority of voters.

Hill is mindful of the politics around property taxes.

We’re not touching Prop. 13. We’re touching Prop. 58,” Hill said. “The goal is to get people to pay their fair share.”

Coupal, head of the Howard Jarvis Taxpayers Association, doesn’t think Hill’s measure is the biggest threat to Californians concerned about taxes.

Source: by Joe Garofoli | San Francisco Chronicle

Southern California Home Sales Plunge 12% In November As Prices Peak

Southern California region home sales plunged in November from a year earlier, while year over year prices increased at the slowest pace in three years amid a housing market slowdown, reported Los Angeles Times.

The 12% decline in November sales from a year earlier was the fourth consecutive monthly drop for the eight southern counties, including Imperial, Los Angeles, Orange, Riverside, San Bernardino, San Diego, Santa Barbara, and Ventura.

The decline in sales for 2018 is still less pronounced than in 2014. Across the eight counties, year over year, lagging median price is still rising — 3.5% from November 2017, to $522,750, but the trend is starting to plateau.

Some housing markets experts are not convinced that a housing bust is materializing. “The housing market is slowing, but… a slowdown does not mean the sky is falling,” said Aaron Terrazas, an economist with Zillow.

LA Times noted if volatility in the stock market and Washington significantly affects consumer confidence and business investment decisions in 2019, the housing market could be due for significant correction into 2020. However, for now, Terrazas and other economists believe the factors that have led to past housing market crashes in Southern California are not visible.

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While some economists do not expect a crash, Bank of America rang the proverbial bell on the broader US real estate market in September, warning existing home sales have peaked, reflecting declining affordability, greater price reductions and deteriorating housing sentiment. 

“Call your realtor,” the BofA note proclaimed: “We are calling it: existing home sales have peaked.”

Richard K. Green, director of the USC Lusk Center for Real Estate, told the LA Times, he is very pessimistic about the housing situation in Southern California.

Green warns prices could plunge 5% to 10% into 2020, even with the current level of economic growth. He argues a similar tune that was said in BofA’s recent housing note: the affordability crisis is topping out the market.

Here are other factors pushing homes further out of reach of Americans:  “The tax law President Trump signed last year limited the amount of deductions for property tax and mortgage interest. Meanwhile, mortgage rates are elevated. The average rate for a 30-year fixed mortgage was 4.55% this week, according to Freddie Mac. That’s down from a recent high of 4.94%, but it’s far higher than the 3.99% level of a year ago,” LA Times said.

There are signs across Southern California that suggest buyers are holding back. 

In Los Angeles County, the median time on the market increased from 41 days in November 2017 to 45 days last month, according to online brokerage Redfin. Moreover, the number of listings with price reductions jumped from 15.9% to 22.2%.

Real estate agents have said buyers have been concern about buying a home as many see the housing market shifting in real time. 

“People are sidelining themselves,” said San Fernando Valley real estate agent Jaswant Singh.

On Thursday, more evidence showed a downward shift in the market. Real estate firm CoreLogic reported a 12% decline in November sales, with the annual rise in the median price coming in at the slowest pace since 2015. 

Southern California median price slipped 0.4% from October and is now $14,250 below the all-time high reached from summer. Inventory is now flooding the market as S&P CoreLogic Case-Shiller index shows a sharp deceleration in price appreciation. 

These are the markings of a turning point in the Southern California real estate market. What comes next you might ask? Well, the start of downward momentum in prices – likely to start in 2019 as the US economy is expected to rapidly slow.

Source: ZeroHedge

California Faces Pension Showdown

Governor Jerry Brown, as he leaves office is warning that California and its public agencies are on the road to “fiscal oblivion” if pension benefits can’t be adjusted down.

The media have been celebrating Governor Brown’s management skills at reversing the $27-billion state deficit he inherited from in 2010 from his predecessor, Arnold Schwarzenegger, to leave office in January with an alleged $13.8-billion surplus and a $14.5-billion rainy-day fund balance.

But Brown recently told reporters that California will be financially distressed again if the California Supreme Court rules in a case titled Cal Fire Local 2881 v. California Public Employees’ Retirement System against Brown’s 2012 California’s Public Employees’ Pension Reform Act that stopped the state and local selling of “airtime” that allowed public employees to spike their pension benefits by purchasing up to five years of un-worked service credit seniority.

California drastically increased public employee pension benefits in the fall of 2003, when the state allowed employees to purchase “airtime.”  Prior to the pension spike, a 50-year-old fireman making $89,000 a year could retire at age 50 after 30 years of service and collect an $80,100-a-year pension with life expectancy of 76.3 years. 

But under “airtime,” the fireman could purchase extra years of seniority at a cost per of $0.18022 per year for every $1 of salary.  For $80,197.90, the fireman could increase his pension by $13,350 to $93,450.  Such an investment in “airtime” would return a spectacular income stream of $351,105 over the next 26.3 years of life expectancy.

With many California public employees purchasing “airtime” to retire at 50 and make more than when employed, Democrat Brown ended the practice in 2013 for new hires after criticism that the practice amounted to a “gift of public funds” to his union allies.

Stanford University’s Institute for Economic Policy Research found that despite the state terminating “airtime” for new employees in 2013, the annual cost of funding the California Public Employee Retirement System (CalPERS) rose by 400 percent from 2003 to 2018 and would be up by 704 percent by 2030.

With an estimated unfunded pension liability of $464.4 billion in 2015, Stanford researchers estimated that the average unfunded liability per California household jumped from $9,127 in 2008; jumped to $21,491 in 2015; and would be over $40,000 in 2030.

The California Supreme Court heard testimony in Cal Fire v. CalPERS on December 5 over claims by the union that a 1955 decision set a precedent, referred to as the “California Rule,” that bars state and local government from reducing any promised retirement benefits without equivalent new compensation. 

Lawyers for the state argued that the California Constitution is not a “straitjacket” and that making pension benefit changes should not be illegal under the California Constitution:

If the impairment is limited and does not meaningfully alter an employee’s right to a substantial or reasonable pension or if it is reasonable and necessary to serve an important public purpose, it may be permissible under the contract clause.

The biggest challenge for Brown’s effort to eliminate the California Rule is that he successfully lobbied the state legislature to pass collective bargaining for public employees in 1982, just as he was retiring from his second four-year term as governor.

The Bureau of Labor Statistics reported that average cost for the average private sector employee contribution for retirement and savings was 3.9 percent, and the average public-sector cost was 11.6 percent.

But even if the California’s Public Employees’ Pension Reform Act survives it Supreme Court appeal, CalPERS’ 2018 average cost for pensions as a percentage of worker compensation was 20.4 percent for State Industrial; 21.5 percent for State Safety; 43.5 percent for State Peace Officer/Fireman; and 55.2 percent for Highway Patrol.

The California Supreme Court is expected to release a decision regarding the California Rule in early 2019, just after Brown leaves office on January 7.

Source: by Chriss Street | American Thinker

C.A.R. Report: California Housing Market Sputtered In November

California Association Of Realtors Report, Absent Seasonal Adjustments

– Existing, single-family home sales totaled 381,400 in November on a seasonally adjusted annualized rate, down 3.9 percent from October and down 13.4 percent from November 2017.

– November’s statewide median home price was $554,760, down 3.0 percent from October and up 1.5 percent from November 2017.

– Statewide active listings rose for the eighth straight month, increasing 31 percent from the previous year.

– The statewide Unsold Inventory Index was 3.7 months in November, up from 3.6 months in October.

– As of November, year-to-date sales were down 4.6 percent.

 

LOS ANGELES (Dec. 18) – California home sales remained on a downward trend for the seventh consecutive month in November as prospective buyers continued to wait out the market, according to the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).  

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 381,400 units in November, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLS’ statewide. The statewide annualized sales figure represents what would be the total number of homes sold during 2018 if sales maintained the November pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

November’s sales figure was down 3.9 percent from the revised 397,060 level in October and down 13.4 percent from home sales in November 2017 of a revised 440,340. November marked the fourth month in a row that sales were below 400,000.

“While many home buyers continue to sit on the sidelines, serious buyers who are in a position to purchase should take advantage of this window of opportunity,” said C.A.R. President Jared Martin. “Now that interest rates have pulled back, home prices have tapered, and inventory has improved, home buyers’ prospects of getting into a home are more positive.”

The statewide median home price declined to $554,760 in November. The November statewide median price was down 3.0 percent from $572,000 in October and up 1.5 percent from a revised $546,820 in November 2017.

“The slowdown in price growth is occurring throughout the state, including regions that have strong economic fundamentals such as the San Francisco Bay Area,” said C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young. “The deceleration in home price appreciation should be a welcome sign for potential buyers who have struggled in recent years against low inventory and rapidly rising home prices.” 

Other key points from C.A.R.’s November 2018 resale housing report include:

  • On a region wide, non-seasonally adjusted basis, sales dropped double-digits on a year-over-year basis in the San Francisco Bay Area, the Central Coast, and the Southern California regions, while the Central Valley region experienced a relatively small sales dip of 3.9 percent.
  • Forty-one of the 51 counties reported by C.A.R. posted a sales decline in November with an average year-over-year sales decline of 16.8 percent. Twenty-six counties recorded double-digit sales drops on an annual basis.
  • Sales for the San Francisco Bay Area as a whole fell 11.5 percent from a year ago. All nine Bay Area counties recorded annual sales decreases, with Marin, San Francisco, San Mateo, and Sonoma counties posting double-digit annual declines.
  • The Los Angeles Metro region posted a year-over-year sales drop of 10.1 percent, as home sales fell 11.2 percent in Los Angeles County and 14.4 percent in Orange County.
  • Home sales in the Inland Empire decreased 6.7 percent from a year ago as Riverside and San Bernardino counties posted annual sales declines of 9.0 percent and 3.2 percent, respectively.
  • Home prices in the San Francisco Bay Area are no longer climbing at the double-digit pace that occurred throughout much of this year. On a year-over-year basis, the Bay Area median price ticked up 0.6 percent from November 2017. While home prices in Marin, San Francisco, San Mateo, and Santa Clara counties continued to remain above $1 million, all but San Mateo County recorded a year-over-year price decline.
  • Statewide active listings rose for the eighth consecutive month after nearly three straight years of declines, increasing 31 percent from the previous year. November’s listings increase was the largest since April 2014.
  • The unsold inventory index, which is a ratio of inventory over sales, increased year-to-year from 2.9 months in November 2017 to 3.7 months in November 2018. The index measures the number of months it would take to sell the supply of homes on the market at the current sales rate.
  • The median number of days it took to sell a California single-family home edged up from 22 days in November 2017 to 28 days in November 2018.
  • C.A.R.’s statewide sales price-to-list-price ratio* declined from a year ago at 98.9 percent in November 2017 to 97.9 percent in November 2018.
  • The average statewide price per square foot** for an existing, single-family home statewide was $282 in November 2018, up from $277 in November 2017.
  • The 30-year, fixed-mortgage interest rate averaged 4.87 percent in November, up from 3.92 percent in November 2017, according to Freddie Mac. The five-year, adjustable mortgage interest rate also increased in November to an average of 4.11 percent from 3.24 from November 2017.

Key Graphics (click links to open):

Note: The County MLS median price and sales data in the tables are generated from a survey of more than 90 associations of REALTORS® throughout the state and represent statistics of existing single-family detached homes only. County sales data are not adjusted to account for seasonal factors that can influence home sales. Movements in sales prices should not be interpreted as changes in the cost of a standard home. The median price is where half sold for more and half sold for less; medians are more typical than average prices, which are skewed by a relatively small share of transactions at either the lower-end or the upper-end. Median prices can be influenced by changes in cost, as well as changes in the characteristics and the size of homes sold. The change in median prices should not be construed as actual price changes in specific homes.

*Sales-to-list price ratio is an indicator that reflects the negotiation power of home buyers and home sellers under current market conditions. The ratio is calculated by dividing the final sales price of a property by its last list price and is expressed as a percentage.  A sales-to-list ratio with 100 percent or above suggests that the property sold for more than the list price, and a ratio below 100 percent indicates that the price sold below the asking price.

**Price per square foot is a measure commonly used by real estate agents and brokers to determine how much a square foot of space a buyer will pay for a property.  It is calculated as the sale price of the home divided by the number of finished square feet.  C.A.R. currently tracks price-per-square foot statistics for 50 counties.

Leading the way…® in California real estate for more than 110 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with more than 190,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

# # #

November 2018 County Sales and Price Activity
(Regional and condo sales data not seasonally adjusted)

November 2018 Median Sold Price of Existing Single-Family Homes Sales
State/Region/County Nov.

2018

Oct.

2018

  Nov.

2017

  Price MTM% Chg Price YTY% Chg Sales MTM% Chg Sales YTY% Chg
Calif. Single-family home $554,760 $572,000   $546,820   -3.0% 1.5% -3.9% -13.4%
Calif. Condo/Townhome $465,770 $476,440   $451,250   -2.2% 3.2% -19.1% -17.4%
Los Angeles Metro Area $512,000 $516,000   $500,500   -0.8% 2.3% -14.0% -10.1%
Central Coast $672,500 $669,500   $685,000   0.4% -1.8% -15.9% -18.0%
Central Valley $320,000 $320,000   $310,000   0.0% 3.2% -11.7% -3.9%
Inland Empire $363,620 $359,000   $340,000   1.3% 6.9% -12.2% -6.7%
San Francisco Bay Area $905,000 $958,800   $900,000 r -5.6% 0.6% -12.7% -11.5%
                   
San Francisco Bay Area                  
Alameda $900,000 $900,000   $880,000   0.0% 2.3% -10.9% -6.7%
Contra Costa $641,000 $657,000   $615,000   -2.4% 4.2% -5.8% -8.0%
Marin $1,172,940 $1,450,000   $1,230,000   -19.1% -4.6% -25.7% -26.8%
Napa $683,500 $709,500   $682,000   -3.7% 0.2% -11.5% -6.1%
San Francisco $1,442,500 $1,600,000   $1,500,000   -9.8% -3.8% -14.0% -12.2%
San Mateo $1,500,000 $1,588,000   $1,486,000   -5.5% 0.9% -22.1% -13.7%
Santa Clara $1,250,000 $1,290,000   $1,282,500   -3.1% -2.5% -10.9% -9.9%
Solano $450,000 $430,000   $410,000   4.7% 9.8% -2.7% -3.6%
Sonoma $612,500 $650,000   $655,000   -5.8% -6.5% -25.5% -29.1%
Southern California                  
Los Angeles $553,940 $614,500   $530,920   -9.9% 4.3% -17.5% -11.2%
Orange $795,000 $810,000   $785,000   -1.9% 1.3% -7.5% -14.4%
Riverside $400,000 $400,000   $383,000   0.0% 4.4% -14.8% -9.0%
San Bernardino $299,450 $289,000   $280,000   3.6% 6.9% -8.0% -3.2%
San Diego $626,000 $635,500   $619,900   -1.5% 1.0% -8.4% -11.0%
Ventura $643,740 $650,000   $640,000   -1.0% 0.6% -18.8% -11.7%
Central Coast                  
Monterey $630,000 $620,000   $618,120   1.6% 1.9% -6.1% -11.2%
San Luis Obispo $624,000 $586,000   $615,000   6.5% 1.5% -14.4% -17.5%
Santa Barbara $550,000 $659,000   $742,000   -16.5% -25.9% -20.3% -18.8%
Santa Cruz $862,500 $885,000   $870,000   -2.5% -0.9% -24.0% -26.1%
Central Valley                  
Fresno $265,750 $272,000   $264,000   -2.3% 0.7% -6.4% -2.9%
Glenn $225,000 $253,000   $232,000   -11.1% -3.0% 12.5% -5.3%
Kern $235,250 $240,000   $235,000   -2.0% 0.1% -14.8% -1.8%
Kings $222,000 $229,000   $230,000   -3.1% -3.5% -3.4% 6.3%
Madera $265,000 $254,950   $245,000   3.9% 8.2% 2.1% -2.0%
Merced $261,930 $271,850 r $255,000   -3.6% 2.7% -22.5% -13.0%
Placer $461,000 $470,000   $450,000   -1.9% 2.4% -5.1% -13.6%
Sacramento $365,000 $360,000   $349,900   1.4% 4.3% -10.2% -7.1%
San Benito $583,200 $597,000   $649,880   -2.3% -10.3% -4.3% 10.0%
San Joaquin $365,000 $369,200   $360,500   -1.1% 1.2% -20.1% 17.5%
Stanislaus $310,000 $319,000   $298,750   -2.8% 3.8% -17.2% -9.2%
Tulare $237,400 $232,000   $215,000   2.3% 10.4% -16.2% -2.5%
Other Calif. Counties                  
Amador NA NA   $348,950   NA NA NA NA
Butte $326,940 $318,000   $315,000   2.8% 3.8% -7.1% 8.3%
Calaveras $325,000 $302,500   $318,000   7.4% 2.2% -33.6% -31.9%
Del Norte $250,000 $223,000   $214,000   12.1% 16.8% -20.0% -42.9%
El Dorado $461,750 $500,000   $470,000   -7.7% -1.8% -28.6% -27.5%
Humboldt $310,000 $315,000   $310,000   -1.6% 0.0% -24.0% 3.2%
Lake $255,000 $265,250   $262,000   -3.9% -2.7% -11.4% -23.5%
Lassen $184,000 $148,000   $189,000   24.3% -2.6% -40.0% -48.3%
Mariposa $355,000 $305,500   $250,000   16.2% 42.0% -12.5% 180.0%
Mendocino $414,000 $420,000   $374,500   -1.4% 10.5% -13.1% 6.0%
Mono $725,000 $599,900   $400,000   20.9% 81.3% -47.1% -35.7%
Nevada $399,000 $401,500   $405,750   -0.6% -1.7% -30.6% -13.9%
Plumas $289,500 $310,000   $302,000   -6.6% -4.1% -44.7% -42.2%
Shasta $283,000 $261,000   $250,000   8.4% 13.2% -17.2% 7.1%
Siskiyou $226,000 $181,500   $189,500   24.5% 19.3% -19.6% -15.9%
Sutter $296,000 $290,000   $270,000   2.1% 9.6% -16.9% -14.7%
Tehama $199,000 $233,250   $224,500   -14.7% -11.4% -38.1% -46.9%
Tuolumne $288,500 $304,000   $325,000   -5.1% -11.2% -15.4% -9.6%
Yolo $429,500 $443,750   $440,000   -3.2% -2.4% -12.5% -26.3%
Yuba $263,000 $282,000   $285,000   -6.7% -7.7% -1.3% 14.5%

r = revised
NA = not available

November 2018 County Unsold Inventory and Days on Market
(Regional and condo sales data not seasonally adjusted)

November 2018 Unsold Inventory Index Median Time on Market
State/Region/County Nov. 2018 Oct. 2018   Nov. 2017   Nov. 2018 Oct. 2018   Nov. 2017  
Calif. Single-family home 3.7 3.6   2.9   28.0 26.0   22.0  
Calif. Condo/Townhome 3.4 3.1   2.2   25.0 21.0   17.0  
Los Angeles Metro Area 4.2 4.0 3.3   32.0 30.0   27.0  
Central Coast 4.4 4.1   3.4   34.0 30.0   30.0  
Central Valley 3.3 3.3   2.9   25.0 21.0   18.0  
Inland Empire 4.7 4.3   3.9   37.0 35.0   31.0  
San Francisco Bay Area 2.3 2.5   1.5   23.0 19.0   15.0  
                     
San Francisco Bay Area                    
Alameda 1.9 2.1   1.2   17.0 15.0   13.0  
Contra Costa 2.2 2.6   1.7   19.0 16.0   14.0  
Marin 3.0 3.0   1.6   35.0 22.0   36.0  
Napa 4.6 5.0   3.8   49.0 41.0   57.5  
San Francisco 1.7 1.9   1.1   16.5 15.0   16.0  
San Mateo 1.9 1.9   1.2   16.0 12.0   12.0  
Santa Clara 2.1 2.4   1.2   18.0 14.0   9.0  
Solano 3.0 3.4   2.4   41.0 39.0   32.5  
Sonoma 3.8 3.3   1.7   49.0 47.5   44.0  
Southern California                    
Los Angeles 3.9 3.7   2.9   27.0 25.0   22.0 r
Orange 3.9 4.1   2.8   28.0 29.0   24.0  
Riverside 4.9 4.3   3.9   36.0 34.0   29.0  
San Bernardino 4.3 4.3   3.9   42.0 35.0   34.0  
San Diego 3.9 3.9   2.7   22.0 24.0   17.0  
Ventura 5.4 5.1   4.4   53.0 51.0   51.0  
Central Coast                    
Monterey 4.3 4.4   3.8   25.0 25.0   28.0  
San Luis Obispo 4.6 4.3   3.7   40.0 29.0   30.0  
Santa Barbara 5.2 4.5   3.7   41.0 40.0   35.0  
Santa Cruz 3.2 3.1   2.2   30.5 21.0   22.5  
Central Valley                    
Fresno 3.5 3.6 r 3.0   19.0 19.0   18.0  
Glenn 4.8 4.9   3.8   73.5 22.5   45.0  
Kern 3.1 2.9   3.3   26.0 21.0   25.0  
Kings 3.5 3.8   3.5   23.5 26.0   16.0  
Madera 5.1 5.7 r 4.4 r 34.0 30.0   28.0  
Merced 4.8 3.7   3.6   23.0 22.0   25.0  
Placer 3.0 3.4   2.3   27.0 25.0   17.0  
Sacramento 2.7 2.8   2.3   24.0 19.0   17.0  
San Benito 3.1 3.6   4.1   41.5 23.0   23.5  
San Joaquin 3.6 3.1   2.9   24.0 22.0   14.0  
Stanislaus 3.3 3.1   2.6   25.0 21.0   18.0  
Tulare 4.1 3.6   3.9   35.0 28.0   29.5  
Other Counties in California                    
Amador NA NA   5.4   NA NA   69.0  
Butte 2.9 3.3   2.8   24.0 21.0   18.0  
Calaveras 6.5 4.7   4.3   53.0 43.5   60.0  
Del Norte 5.6 5.0   4.0   110.0 95.0   111.0  
El Dorado 4.4 3.6   2.7   41.5 48.0   40.0  
Humboldt 5.8 4.9   5.3   24.5 27.0   28.0  
Lake 7.0 6.7   4.7   60.5 51.0   54.0  
Lassen 8.6 6.1   5.0   110.0 109.0   85.0  
Mariposa 4.8 4.6   12.2   147.0 24.0   6.0  
Mendocino 7.9 7.3   5.7   66.0 87.0   63.5  
Mono 8.4 4.8   4.9   127.0 115.0   153.5  
Nevada 5.7 4.3   3.9   41.0 40.5   33.0  
Plumas 9.8 6.1   5.1   152.0 87.0   143.0  
Shasta 4.4 3.9   4.3   26.5 34.5   33.0  
Siskiyou 7.1 6.6   5.5   60.5 20.0   60.5  
Sutter 2.9 3.1   3.0   29.5 34.0   32.0  
Tehama 9.2 5.4   4.0   49.5 48.5   63.0  
Tuolumne 5.8 5.6   3.9   58.5 47.0   42.0  
Yolo 3.7 3.7   1.9   27.0 22.0   22.0  
Yuba 2.9 3.0   3.4   30.0 33.0   17.0  

r = revised
NA = not available

Source: California Association Of Realtors

Home Builder Toll Brothers Shocks With 13% Plunge In Orders As California Falls A Staggering 39%

Toll Brothers announced its fourth quarter results on Tuesday, unleashing a fresh flood of concerns about the state of the housing market after it disclosed its first drop in orders since 2014. Orders were down 13% from the year prior, missing the analyst estimate of a 5% increase in dramatic fashion.

The company focuses much of its business on the California high-end home segment, which – as a result of the housing bubble in most west coast cities and rising rates, is facing an “affordability crisis” coupled with a sharp drop in overseas demand. According to the company, orders for the state were down an astounding 39%.

https://www.zerohedge.com/sites/default/files/inline-images/toll%20orders.jpg?itok=fju7d_NC

The company blamed rising rates for the drop off in buyer demand, as well as sinking stock prices. What is odd is that stock prices haven’t really “sunk” – unless the company was referring to its own stock…

https://www.zerohedge.com/sites/default/files/inline-images/toll%2012.4.jpg?itok=IMfGjqZK

... with the CEO blaming “the effect on buyer sentiment of well-publicized reports of a housing slowdown” for the plunge in orders. You see, it’s not the housing market that is slowing: it is perceptions about the market slowing, that is hitting the company.

That said, “perceptions” are correct: as we noted last week, new home sales crashed in October, suffering the biggest plunge since 2011.

https://www.zerohedge.com/sites/default/files/inline-images/2018-11-28_7-01-59.jpg

Even so, the atrocious quarter didn’t deter all analysts, who promptly defended the stock. Drew Reading, Bloomberg Intelligence analyst stated that “there are many positive factors underpinning the economy that we believe are supportive of the housing sector longer-term, and our affluent markets particularly.”

Tolls dismal results follows signs that we have been discussing for much of the past year, which have confirmed that the luxury housing market is cooling off across the country.

Recently, we profiled a mansion in Chicago that was taken off the market after being listed for $50 million and only being assessed for $19.4 million. United Automobile Insurance Chairman and CEO Richard Parrillo constructed the 25,000 sq ft Lincoln Park mansion a decade ago, after buying the property in 2005 for $12.5 million from the Infant Welfare Society.

After two years on the market, Parrillo and his wife held firm at $50 million, a record for the region, their original listing agent told the Chicago Tribune. The agent said the couple plowed more than $65 million into the estate, including land cost.

https://www.zerohedge.com/sites/default/files/inline-images/mansion_0.jpg?itok=jN4nFo9W
$50 million Lincoln Park mansion — Chicagoland’s priciest listing — taken off the market

Cook County Assessor’s Office reports shows the mansion’s $50 million asking price was hugely overinflated versus its most recent estimated market value, which stood some 60% lower, at $19.4 million. The report notes the 2018 property value is significantly higher from the assessor’s $14 million estimated market value for the mansion in 2017, due to a quick burst in high-end home sales in the last several years that had since cooled.

Source: ZeroHedge