Category Archives: Real Estate

Sliding Home Prices Turn Around In Parts Of Southern California

Single family home prices in Orange, Los Angeles and San Diego counties changed course, climbing up in April after falling year over year in March.

Sales volume was down statewide, but the median resale home price set a record high in California in April, hitting $602,920. (File photo by Marilyn Kalfus/SCNG)

Riverside County had the biggest price gain of five Southern California Counties, at 5.8%, with the median resale of a home up to $423,000 from $400,000 in April 2018. San Bernardino saw a 5.2% hike, with the price at $305,000 compared with $289,900 the prior year.

Orange County had the smallest uptick – 0.9% – but the heftiest price: It rose to $825,000 in April from $818,000 last year. Los Angeles, with a 3% increase, saw prices go to $544,170 from $528,550 last April. San Diego rose 2.2% to $649,000 from $635,000.

The analysis comes from the California Association of Realtors, which reports on the resale of houses around the state. Sales of existing houses account for just over two-thirds of all home sales in Southern California.

In March, CAR’s numbers reflected the first year-over-year price drop for Los Angeles and San Diego counties in seven years and the third in Orange County in the previous four months.

Statewide, demand weakened and sales were down, but the median home price set a record high in April, reaching $602,920 and passing the $602,760 high set in the summer of 2018. April’s price was up 3.2% from $584,460 in April 2018, CAR said.

“While we started off the spring homebuying season on a down note, home sales in the upcoming months may fare better than the top-level numbers suggest,” said Leslie Appleton-Young, CAR’s senior vice president and chief economist. “The year-over-year sales decrease was the smallest in nine months, and pending home sales increased for the second straight month after declining for more than two years.”

She said a sharp sales rebound is not expected, but neither is an acceleration of declines.

Sales volume dipped in Los Angeles (-0.1%), Riverside (-6.5%) and San Bernardino counties (-7.7%), but was up in Orange (0.5%) and San Diego counties (2.4%).

“Weak buyer demand, largely prompted by elevated home prices, is playing a role in the softening housing market,” said CAR president Jared Martin. “However, with low-interest rates, cooling competition and an increase in homes to choose from, buyers can take advantage of a more balanced housing market.”

Mortgage rates fell to 4.06%, in March, a 14-month low. The 30-year fixed-rate mortgage averaged 4.07% for the week ending May 16, down from last week’s rate of 4.10%, according to Freddie Mac.

Source: by Marilyn Kalfus | The Orange County Register

Advertisements

Tel Aviv Skyscraper: Remake of Tower of Babel or Preparation for Third Temple?

“See, a time is coming—declares Hashem—when the city shall be rebuilt for Hashem from the Tower of Hananel to the Corner Gate;” Jeremiah 31:37 (The Israel Bible™)

https://mk0breakingisralps2c.kinstacdn.com/wp-content/uploads/2019/01/Babel_Azrieli.jpg

Tower of Babel (left) and proposed Azrieli tower.

One of the largest real-estate developers in Israel revealed plans for the soon-to-be tallest building in Israel that looks surprisingly similar to images of what the Tower of Babel may have looked like. But a closer look reveals the new building may be much more, what one rabbi thinks could be a dry-run for building the Third Temple.

The Azrieli Group, an Israeli real estate and holding company, announced their plan to build Israel’s tallest building as an addition to their already impressive Azrieli Center Complex in Tel Aviv. Topping out at 91 stories and reaching 1,150 feet toward the heavens, it is estimated that the Spiral Tower will take six years to complete at an estimated cost of $666 million. The new tower will take its place next to the iconic circle, square and triangle towers that make up the Azrieli Complex. By building the Spiral Tower, the Azrieli Group will outdo itself as they built the current tallest building in Israel, The Azrieli Sarona Tower which stands 782 feet high with 53 floors, just two years ago.

The plans are ambitious, with around 150,000 square meters containing commercial space, offices, residences, and a hotel. Six underground parking levels, covering an area of 45,000 square meters, will be built at the base of the structure, in addition to a commercial floor connected directly to the light rail. The tower’s peak will include space for conferences and meetings, recreational space, and a 360-degree view of Tel Aviv and the surrounding area. it is predicted that approximately 100,000 people will pass through the center every day.

The unique design was produced by Kohn Pedersen Fox Associates (KPF), a New York-based architecture firm which is responsible for five of the 10 tallest skyscrapers in the world. According to the press release, the architects took their inspiration from nature as well as Jewish heritage.

“The tower was planned and developed in a unique geometric shape, never before seen in Israel, which captures the eye and the imagination. The main challenge for the initiators and architects was to create harmony between the three iconic towers that form Azrieli Center and the new tower, an impressive, one-of-a-kind structure which stands on its own. The tower’s design takes inspiration from the twists of a snail’s shell, attempting to imitate their natural form. The design also draws inspiration from ancient biblical scrolls and the way they unfurl upwards.”

More cynical critics of the design might draw a comparison between the elegant design presented by the developers and certain depictions of the Biblical Tower of Babel. Though the Biblical account contains no details other than it builders aspirations for it to reach great heights.

And they said, “Come, let us build us a city, and a tower with its top in the sky, to make a name for ourselves; else we shall be scattered all over the world.” Genesis 11:4

Traditional Jewish sources provide additional details. Midrash (homiletic teachings) described “an idol on the top holding a sword, so that it may appear as if it intended to war with God.” The Midrash also described a structure built on tall columns designed to protect the tower from another divine flood.

Some modern scholars have associated the Tower of Babel with known structures, notably the Etemenanki, a ziggurat dedicated to the Mesopotamian god Marduk built by Babylonian King Nabopolassar in 610 BCE. Indeed, the Spiral Tower Design closely resembles a ziggurat, an ancient structure from the Middle East built as a terraced compound of successively receding stories or levels. at the top of each ziggurat was a shrine. Also, similar to the Azrieli Towers,  each ziggurat was part of a larger complex that included a courtyard, storage rooms, bathrooms, and living quarters, around which a city was built.

Yisrael Rosenberg is an author who has a powerful connection to the spiritual implications of construction. His daytime job is as a tour guide for the Western Wall tunnels.

“The main sin connected to the Tower of Babel was not in their action but in their intention. The bottom line is that the intent of the builders and the architects of the Azrieli tower is l’shem shamayim (in the name of heaven). The fact that they envisioned a Torah scroll while designing the building is remarkable. Even if it was just for beauty, beauty can be to praise God’s creation.”

Rosenberg noted that the builders of the Tower of Babel came together to challenge heaven, hence their punishment was to be divided and scattered.

“Tel Aviv needs high towers since it is becoming densely populated,” he said. “This is a Tikkun (fixing) for what happened after the Tower of Babel. It allows people to be together in Israel.”

He also noted that for the 2,000 years of exile, Jews excelled in many fields but were less represented in architecture and land development.

“Everything we learn about construction in Israel is just one step away from the Beit Hamikdash,” Rosenberg said. “Just like Solomon’s Temple, the Third Temple will be with the agreement and blessings of every nation in the world and it will be the greatest construction project ever seen. We need to learn how to lead the world in this project.”

Source: by Adam Eliyahu Berkowitz |Breaking Israel News

Interest-Only Issuance Has Skyrocketed, But Is lt Time To Worry Yet?

A larger volume of CMBS loans are being issued with interest-only (IO) structures, but this rise may put the CMBS market in a dicey position when the economy reaches its next downturn. To put things in perspective, interest-only loan issuance reached $19.5 billion in Q3 2018, six times greater than fully amortizing loan issuance. In comparison, nearly 80% of all CMBS issued in the FY 2006 and FY 2007 was either interest-only or partially interest-only loans.

In theory, the popularity of interest-only loans makes sense, because they provide lower debt service payments and free up cash flow for borrowers. But these benefits are partially offset by some additional risks in the interest-only structure, with the borrower’s inability to deleverage during the loan’s life perhaps being the biggest concern. Additionally, borrowers who opt for a partial interest-only structure incur a built-in “payment shock” when the payments switch from interest-only to principal and interest.

Why are we seeing a spike in interest-only issuance if the loans are inherently riskier than fully amortizing loans? Commercial real estate values are at all-time highs; interest rates are still historically low; expectations for future economic and rent growth are fundamentally sound, and competition for loans on stabilized, income-producing properties is higher than ever. Furthermore, the refinancing pipeline is miniscule compared to the 2015-2017Wall of Maturities, so more capital is chasing fewer deals. This causes lenders to augment loan proceeds and loosen underwriting parameters, including offering more interest-only deals.

Then and Now: Why the Rise in 10 Debt Has Raised Concerns

Between Q1 2010 and Q1 2012, fully amortizing loans dominated new issuance, with its market share amass­ing as much as 80.4% (Q1 2012). Interest-only issuance was nearly equal to the fully amortizing tally by Q3 2012, as interest-only debt totaled $5.10 billion, only $510 million less than fully amortized loans. Interest-only issuance would soon overtake fully amortizing loan issuance by Q2 2017, as its volume skyrocketed from $5.3 billion in Q1 2017 to $19.5 billion in Q3 2018.

Prior to the 2008 recession, the CMBS market experienced a similar upward trend in interest-only issuance. By 02 2006, interest-only loans represented 57.6% of new issuance, out­pacing fully amortizing notes by 38.86%. The difference in issuance between interest-only and fully amortizing loans continued to widen as the market approached the recession, eventually reaching a point where interest-only debt repre­sented 78.8% of new issuance in 01 2007. Even though the prevalence of interest-only debt is mounting, why would this be a concern in today’s market?

https://www.zerohedge.com/s3/files/inline-images/trepp1_0.jpg?itok=4N-aALO3

IO Loans Are More Likely to Become Delinquent

Interest-only loans have historically been more suscep­tible to delinquency when the economy falters. Immedi­ately following the recession, delinquency rates across all CMBS loans moved upward. Once the economy began to show signs of recovery, the delinquency rate for fully am­ortized loans began to decline, while interest-only and par­tially interest-only delinquencies continued to rise. In July 2012, the delinquency rate for fully amortizing loans was sitting at 5.07% while the interest-only reading reached 14.15%. The outsized delinquency rate for interest-only loans during this time period is not surprising, since many of the five-year and seven-year loans originated in the years prior to the recession were maturing. Many of the borrowers were unable to meet their payments due to significant declines in property prices paired with loan bal­ances that had never amortized.

Over time, the stabilization of the CMBS market led to subsequent declines in the delinquency rates for both the interest-only and partial interest-only sectors. The delin­quency rate for interest-only loans clocked in at 3.17% in December 2018, which is down nearly 11 % from its peak. Delinquency rates across all amortization types have failed to return to pre-crisis levels.

Just because a large chunk of interest-only debt became delinquent during the previous recession does not mean the same is destined to happen in the next downturn.

https://www.zerohedge.com/s3/files/inline-images/Trepp2_0.jpg?itok=hieJDjUV

Measuring the likelihood of a loan turning delinquent is typically done by calculating its debt-service coverage ra­tio (DSCR). Between 2010 and 2015, the average DSCR across all interest-only loans was a relatively high 1.94x. Since 2016, the average DSCR for interest-only debt has fallen slightly. If the average DSCR for interest-only loans continues to decline, the inherent risk those loans pose to the CMBS market will become more concerning.

The average DSCR for newly issued interest-only loans in March 2019 registered at 1.61 x, which is about 0.35x higher than the minimum DSCR recommended by the Commercial Real Estate Finance Council (CREFC). In 2015, CREFC released a study analyzing the impact of prudential and securities regulation across the CRE finance sector. In the study, CREFC cited a 1.25x-DSCR as the cutoff point between relatively healthy and unhealthy loans. The value was chosen through loan-level analysis and anecdotal information from conversations with members.

The figure below maps the DSCR for both fully amortizing and interest-only loans issued between 2004 and 2008. Notice that toward the end of 2006, the average DSCR hugged the 1.25x cutoff level recommended by CREFC. Beyond 2006, the average DSCR for interest-only loans oscillated between healthy and concerning levels.

https://www.zerohedge.com/s3/files/inline-images/trepp3_0.jpg?itok=xgvNXKFE

The second figure focuses on CMBS 2.0 loans, where a sim­ilar trend can be spotted. After roughly converting interes-t­only loan DSCRs to amortizing DSCRs using underwritten NOI levels and assuming 30-year amortization, the average DSCR for interest-only loans issued between 2010 and mid- 2014 (2.04x) is much greater than that for fully amortizing issuance (1.78x). While part of this trend can be attributed to looser underwriting standards and/or growing competition, the other driver of the trend is due to selection bias. Lend­ers will typically give interest-only loans to stronger proper­ties and require amortization from weaker properties, so it makes sense that they would also require less P&I cover­age for those interest-only loans on lower-risk properties.

https://www.zerohedge.com/s3/files/inline-images/trepp4_0.jpg?itok=1F8l-CcE

What Lies Ahead for the IO Sector?

Rising interest-only loan issuance paired with a drop in av­erage DSCR may spell for a messy future for the CMBS industry if the US economy encounters another reces­sion. At this point, CMBS market participants can breath a little easier since interest-only performance has remained above the market standard. However, this trend is worth monitoring as the larger volume could portend a loosening in underwriting standards.

Source: by Trepp | ZeroHedge

NYC’s Chrysler Building Sold For Massive Discount

Signa Holding, Austria’s largest privately owned real estate company, has reached an agreement to purchase the iconic Chrysler Building in New York City in partnership with property firm RFR Holding for about $150 million, according to Reuters.

https://www.zerohedge.com/s3/files/inline-images/chysler%20building.jpg?itok=LA9qSufC

The price is at a steep discount compared to the $800 million the Abu Dhabi Investment Council paid for a 90% stake in the building right before the 2008 financial crisis. Shortly after the investment arm of the Government of Abu Dhabi bought the property, commercial real estate prices crashed.

https://www.zerohedge.com/s3/files/inline-images/chrysler-nyc%20view.jpg?itok=3T3jXqFz

Sources told Reuters that the deal includes both the office building and the pyramid-topped Trylons on the land between the tower and 666 Third Avenue.

https://www.zerohedge.com/s3/files/inline-images/TrylonTowers.jpg?itok=_JQAgsAF

The Art Deco–style skyscraper, was completed in 1930 on the East Side of Midtown Manhattan in New York City. It is a recognizable symbol of Manhattan’s skyline, was for a short time in the early 1930s the tallest building in the world, only to be surpassed by the Empire State Building.

https://www.zerohedge.com/s3/files/inline-images/1930s%20chysler%20building.jpg?itok=AjjVpOFt

The most significant factor weighing on the price is out of control expenses tied to the building’s ground lease. The land under the tower is owned by the Cooper Union school, which raised the rent to $32.5 million last year from $7.75 million in 2017.

“The ground lease is a glaringly obvious negative,” Adelaide Polsinelli, a broker at New York City-based Compass, told Bloomberg. “The other negatives are that the space is not new and it is landmarked, therefore it’s twice as hard to get anything done.”

Tishman Speyer Properties and the Travelers Insurance Group bought the Chrysler Building in 1998 for about $230 million. In 2001, a 75% stake in the building was sold, for $300 million to TMW, the German arm of an Atlanta-based investment fund. Abu Dhabi bought the German fund’s share as well as part of Tishman’s in June 2008. Reuters said Signa and RFR were extremely close to a deal to purchase the tower.

Signa has an extensive portfolio of landmark buildings in prime locations. Its holdings include KaDeWe and the Upper West Tower in Berlin, Goldenes Quarter with the Park Hyatt Hotel in Vienna, Alte Akademie in Munich, and Alsterhaus and Alsterarkaden in Hamburg.

RFR has also made a name for itself in commercial real estate by owning and managing some of Manhattan’s most prestigious commercial properties, including the Seagram Building and Lever House, which are located on Park Avenue.

Signa and RFR had completed several deals together in the past,  including in 2017, when Signa bought five landmark properties from RFR in Berlin, Hamburg, Frankfurt, and Munich for about 1.5 billion euros.

Source: ZeroHedge

Illinois’ Lethal Combination: Rising Property Taxes & Stagnant Incomes

A lethal combination of rising property taxes and stagnant incomes has forced many Illinoisans to rethink their relationship with their state. More than 1.5 million net residents have already fled the state since 2000 – and you can’t blame others for thinking about joining them.

Property taxes have become punitive in Illinois. We’ve written about how these taxes have destroyed the equity in people’s homes across the state. Many families have done the math, and whether they’re in the struggling south suburbs of Chicago or the affluent North Shore, they’ve decided to leave Illinois behind.

The traditional method for measuring the burden of property taxes is to look at a household’s property tax bill and compare it to a home’s value. Under this method, Illinoisans pay the highest property taxes in the nation. At 2.7 percent, Illinoisans pay far more than residents in neighboring states – twice more than those in Missouri and three times more than residents in Indiana.

https://www.zerohedge.com/s3/files/inline-images/Illinoisans-pay-the-highest-property-tax-rates-in-the-nation.png?itok=TySk9EJ4

That fact is outrageous on its own.

But to really understand the pain that these taxes inflict on Illinoisans, it’s important to compare property tax bills to household incomes. After all, those bills are paid straight from people’s earnings.

The unfortunate reality is that Illinois incomes have been stagnant for years – and falling when you consider the impact of inflation.

Between 2000 and 2017, Illinois median household incomes increased just 34 percent, far short of inflation. In contrast, household property tax bills are up 105 percent, according to Illinois Department of Revenue data.

https://www.zerohedge.com/s3/files/inline-images/Illinois-property-taxes-have-grown-three-times-faster-than-incomes.png?itok=pxu4sFvb

The net result: Property tax bills per household have grown three times faster than household incomes since 2000.

That means more of Illinoisans’ hard-earned incomes are going toward property taxes and less towards groceries, college tuition, and retirement savings. In 2017, 6.73 percent of household incomes went toward property taxes, up from 4.3 percent in 2000.

https://www.zerohedge.com/s3/files/inline-images/Illinois-property-taxes-consumed-6.7-percent-of-household-incomes-in-2017.png?itok=wNlz9IY8

That’s a 55 percent increase in the effective tax rate.

The detailed data is below:

https://www.zerohedge.com/s3/files/inline-images/Illinois-property-taxes-consume-more-of-household-incomes-when-compared-to-2000.png?itok=ncfCS74C

Property taxes, county by county

https://www.zerohedge.com/s3/files/inline-images/Top-10-Illinois-counties-with-the-highest-property-tax-rates.png?itok=DdaYf29G

Residents of Lake County pay the highest property taxes in Illinois when measured as a percentage of household incomes. In 2000, Lake County residents paid 6.5 percent of their household incomes toward property taxes. Today, residents pay 9.1 percent. That’s a 40 percent increase. The average Lake County property tax bill is now over $7,500 per household.

Meanwhile the residents of the other collar counties and Cook pay more than 7 percent of their incomes to property taxes, with average bills ranging from $4,500 to $6,200 a year.

Overall, the collar counties pay the highest taxes as a percent of income in the state. But it’s not just the Chicago suburbs that are taking a hit. Taxpayers statewide have seen their taxes rise.

https://www.zerohedge.com/s3/files/inline-images/Top-10-Illinois-counties-with-the-highest-growth-in-property-tax-rates.png?itok=ZF6tO_IT

In fact, most of the counties that have had the biggest tax growth, in percentage terms, are found downstate. Hardin County residents, though they pay low rates, have seen them jump 97 percent since 2000. Residents in Pulaski County, have seen their rates go up by 78 percent.

Cook County comes next at 75 percent, but after that it’s all deep downstate again: Calhoun (70 percent), Greene (66 percent), Jersey (65 percent), and Pope County (62 percent).

Taxes too high

Any way you cut it, Illinoisans are being punished by property taxes.

That’s prompted some, including new Gov. J.B. Pritzker, to propose a reduction in property taxes by increasing income taxes.

But that would do Illinoisans no good. Illinoisans already pay the nation’s 6th-highest rates when you lump all state and local taxes together.

https://www.zerohedge.com/s3/files/inline-images/Illinoisans-pay-the-6th-highest-state-local-tax-rate-in-the-nation.png?itok=DtJreRql

Shifting them around won’t help when the total tax bill is too high to begin with. What Illinoisans need is tax cut, not a tax shift.

Source: ZeroHedge
By Ted Dabrowski and John Klingner via WirePoints.com

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

Chinese Firms Dumped $1 Billion Of US Real Estate Last Quarter

After being one of the most steadfast buyers of American real estate for years, large Chinese firms continued dumping high-profile US real estate in the third quarter, the Wall Street Journal reports, selling more than $1 billion of property as Beijing forced insurers, conglomerates, and other big investors into debt-reduction programs.

Chinese investors dumped $1.05 billion worth of prime US real estate in the third quarter while purchasing only $231 million of property, according to data firm Real Capital Analytics. This marks the second consecutive quarter where investors were net sellers of US commercial real estate, and the first time investors sold more US property than they bought since the 2008 crash.

https://www.zerohedge.com/sites/default/files/inline-images/wsj%20chart%20.png?itok=xBKb-mmR

In the last decade, Chinese investors plowed tens of billions of dollars into US real estate, with a concentration in major metro areas like New York, Los Angeles, San Francisco, and Chicago. The Journal notes that Chinese buyers “never represented more than a fraction of the buying power in any U.S. market,” however they made headlines for paying massive premiums. 

Now, the party has unexpectedly ended.

Rising corporate debt levels and concerns over currency stability has forced the Chinese government to tighten capital outflows and clamp down on overseas acquisitions. 

As ZeroHedge discussed last month, total Chinese Credit Creation unexpectedly collapsed, resulting in shock waves of weakness across the domestic and global economy. Amid speculation that Beijing is engineering a “slow landing” through a significant slowdown in credit issuance, investors – hungry for liquidity – are unloading US properties at a rapid clip. In global markets, this will likely create a deflationary chill and lead to a further slowdown in 2019.

https://www.zerohedge.com/sites/default/files/inline-images/TSF%20GS%20chart%20nov%202018_0.jpg?itok=_0m1zT6m

Trade tensions between Beijing and the Trump administration have not helped the situation, as more Chinese firms sold properties amid worries the trade war could deepen in the coming quarters, and potentially lead to more aggressive blow back at Chinese investors. 

“This has to do more with a change in how capital is permitted to behave rather than Chinese investors saying ‘I don’t like the U.S.’,” said Jim Costello, senior vice president at Real Capital Analytics.

“Ping An Insurance Group Co. of China and partners in August sold a 13-story Boston office building for $450 million, the largest sale by a Chinese investor during the third quarter, Real Capital Analytics said. Its U.S. partner Tishman Speyer said it was the one that drove the decision to sell the building.

China’s retreat showed signs of continuing in the fourth quarter. Dalian Wanda Group sold a glitzy development site in Beverly Hills, Calif., last month for more than $420 million. The Chinese conglomerate purchased the eight-acre parcel in 2014 for $420 million and had planned to develop luxury condominiums and a boutique hotel on the site, but feuds with a local union and contractors stalled progress.

Anbang recently engaged Bank of America Corp. to help it sell a portfolio of luxury hotels that it acquired two years ago for $5.5 billion, though the Waldorf isn’t part of that sale, according to a person familiar with the matter,” said the Journal.

“Anbang is reviewing the company’s U.S. real estate portfolio after seeing price recovering in local property market due to strong recovery of the U.S. economy,” said Shen Gang, a spokesman for Anbang.

Still, some strategists believe that Chinese selling may slow in the months ahead.

“I do not think it will be a tidal wave of sales,” said Jerome Sanzo, managing director and head of U.S. Real Estate Finance for Industrial & Commercial Bank of China. “Some of them are not able to move forward for various reasons and will take gains now while waiting for future changes.”

In a highly leveraged economy such as China’s, growth is a lagged result of changes in the supply of credit. And with credit creation waning in China, it is less of a mystery why local corporations are rushing to “liquify” as fast as possible: the Chinese credit squeeze is well underway. Prepare for a global slowdown in 2019, one which has already hit the US housing market hard.

Source: ZeroHedge