New Homes Are Getting Smaller

DAILY REAL ESTATE NEWS | MONDAY, NOVEMBER 27, 2017 Developers are continuing to shrink the size of new single-family homes, according third-quarter housing data compiled by the National Association of Home Builders. The median square footage of a single-family home was 2,378 square feet in the third quarter. In the years following the Great Recession, builders were focused on the higher end of the market, catering to larger-sized homes. But more recently, builders have renewed their focus on the entry-level market, and NAHB predicts square footage of new homes to continue to decrease. “Typical new-home size falls prior to and during a recession, as home buyers tighten budgets, and then sizes rise as high-end home buyers, who face fewer credit constraints, return to the housing market in relatively greater proportions,” NAHB explains at its Eye on Housing blog. “This pattern was exacerbated during the current business cycle due to the market weakness among first-time home buyers. But the recent declines in size indicate that this part of the cycle has ended, and the size will trend lower as builders add more entry-level homes into inventory.” Source: “Declining New Home Size Trend Continues,” National Association of Home Builders’ Eye on Housing blog (Nov. 17, 2017)

This Is How Fast a Home Sells Today

DAILY REAL ESTATE NEWS | TUESDAY, NOVEMBER 28, 2017 Homes today spend a median time of three weeks on the market—far shorter than the median of 11 weeks five years ago, according to new data from the National Association of REALTORS®. “The inventory shortage and the growing economy and job creation has increased the interest in home buying,” says NAR Chief Economist Lawrence Yun. “There is just not enough inventory; people need to fight over the few homes available on the market.” Historically, about 1.2 million new homes are built every year, but this year, only about 800,000 have been constructed. “It’s been below that in prior years, and in the past decade, greatly lower than that,” Yun says. “Today’s shortage is largely explained by a decade of underproduction.” Some markets are so hot that even three weeks is too long for a home to sit. “If we make it three weeks in our market, there is something wrong,” Boston-area real estate agent Darlene Umina told CNNMoney. “These days, you know within the first weekend whether the price was right.” Umina says she hosted an open house earlier this year that resulted in 18 offers on the home. Three of those offers were cash. In San Francisco, real estate pro Erin Thomas says she’s had buyers arrive at open houses and submit an offer on the spot. She also says offers above the list price and without contingencies are becoming more commonplace. Source: “This Is How Long it Takes to Sell a House,” CNNMoney (Nov. 27, 2017)

Millennials: We Don’t Want to Be Renters

DAILY REAL ESTATE NEWS | TUESDAY, NOVEMBER 28, 2017 Though many are stuck renting out of financial necessity, millennials show the same desire for homeownership as their parents and grandparents—and traditional suburban properties appeal to them more than renting or buying in cities, Bloomberg reports. Many economists have acknowledged that the slow path to homeownership for young adults is contributing to record-low homeownership rates. But for two consecutive quarters, the homeownership rate among those ages 35 and younger has been on the rise. Some economists predict that millennials will eventually own homes at similar rates as their parents. Rents, however, are taking a bigger bite out of household budgets, making it difficult for young adults to save enough for a down payment. Student loan debt is also delaying homeownership by up to five years, according to a 2016 study by the National Association of REALTORS®. Millennials also have less job security than prior generations, and their careers are more likely to require relocation. “You go back 20 or 30 years, people would get a job in their late 20s, early 30s, with the idea that they might work there until retirement,” Dean Baker, codirector of the Center for Economic and Policy Research, told Bloomberg. “People aren’t in that boat today.” Young adults who are ready for homeownership are also facing a shortage of homes in the market. “The result is that price gains continue to exceed income growth through scarcity, particularly in that smaller home market, which is the hardest market for a builder to essentially reach and build to these days,” Robert Dietz, chief economist at the National Association of Home Builders, told Bloomberg. Overall, though, economists seem to be upbeat about millennials. They’re getting married and having children later than their parents did, but they are starting to “cross barriers typically associated with buying,” Bloomberg reports. “Right now, probably a third of our housing business is young couples coming out of the apartments,” Chris Nelson, a builder in Simsbury, Conn., told Bloomberg. “We really think that’s just the beginning—that over the next three to five years, we’re going to see a ton of people coming out of the apartments, buying homes.” Source: “Millennials Want to Own Homes Too, if U.S. Economy Would Consent,” Bloomberg (Nov. 26, 2017)

DAILY REAL ESTATE NEWS | WEDNESDAY, NOVEMBER 29, 2017 The front porch—a classic feature of American homes—is making a comeback but with a twist.

The Front Porch Is in Demand Younger crowds are literally turning porches into stages. “Porchfest” is growing in popularity across the country, in which neighborhood music festivals pop up that are enjoyed from homeowners’ front porches. The Atlantic Monthly’s CityLab reports: “In the Instagram age, the front steps have become places to see and be seen, throw a rocking concert or party, and to foster metropolitan community in a walk-by, stop-in-for-wine sense.” Read more: Welcome Back the Front Porch Shelley Glica in Niagara Falls, Ontario, told CityLab how she organized a Porchfest in her community and how in warmer months she’ll also host a “Stories From the Porch” series of speakers on art, history, and culture. Glica and others represent a generational rethinking of the front porch, CityLab reports. Porches are growing in demand across the country. Twenty-three percent more new homes are being constructed with a front porch than two decades ago. The number of new homes built with porches was at 65 percent last year, according to the National Association of Home Builders. In the Southeast, that figure jumps to 86 percent. An NAHB survey from 2016 also shows that millennials—more than any other age group—say they want a porch. The front porch was once a celebrated signature of Federal architecture. In the 1800s, past presidents had launched successful front-porch political campaigns. For homeowners, front porches were a place to do chores, such as shuck beans, or to get fresh air on hot days before air conditioners. But once air conditioning was invented, Americans showed less need for cooling porches in the middle of the 20th century. The invention of televisions also pushed homeowners inside more. Nowadays, younger generations are finding the porch can be an enjoyable hangout spot. Scott Doyon, who organized a Porchfest in the Atlanta area, says the front porch is now being used as a place to host friends over for hors d’oeuvres or even sharing a concert on Instagram or other social media. “I try to find ways to plug those old ways of living into the modern world,” Doyon says. “I still believe in the value of porches as a conduit to community-building—it just unfolds in a different way now.” Source: “America Rediscovers Its Love of the Front Porch,” CityLab.com/The Atlantic Monthly (Nov. 20, 2017)

How Neighborly Are Americans? Not Very

DAILY REAL ESTATE NEWS | THURSDAY, NOVEMBER 30, 2017 Nearly 30 percent of Americans admit they don’t know their neighbor’s first name. But at least 90 percent have smiled or spoken to their neighbors—at least once, according to a new survey of more than 1,000 Americans released by Safehome.org, a home security systems review resource. Fifty-three percent of Americans say they’ve introduced themselves when a new neighbor initially moved in, but they won’t likely become best buddies. Only a fraction of Americans—34 percent—say they’ve been in their neighbor’s home or vice versa, and only 16 percent have hung out with neighbors outside of the neighborhood. Baby boomers tend to be the most neighborly generation, according to the survey. Sixty-seven percent of baby boomers said they’ve spoken to their next-door neighbor frequently, while only 36 percent of millennials have said they’ve done the same. In a look at neighborly behavior across ethnic lines, Asian-Americans were found to participate the least among in neighborly reactions at 39 percent, followed by Hispanic participants at 40 percent. Caucasians and African-Americans performed more neighborly reactions—such as smiling and chatting—at 49 percent and 46 percent, respectively. Sixty-three percent of all respondents reported not often speaking to neighbors of a different race. “Knowing your neighbors doesn’t just extend your social circle—it can also have a good effect on your mental and physical health and increase the security of your home,” according to the Safehome.org report. “You may even have a friend, partner, confidante, or baby sitter living next door that you never even knew existed.” Source: “A Nation of Neighbors,” Safehome.org (November 2017)

Charity Deduction Faces Same Tax Reform Risk as MID

Of all the itemized deductions, the one for charitable contributions might seem to come out the best under tax reform. That’s because it’s the only deduction under both the House and the Senate versions of the bill that is largely undiminished. And yet charities complain donations will dry up under tax reform. What gives? b“Provisions in the tax bill the House and Senate are considering would make the situation worse” for charities, Ray Madoff, director of the Boston College Law School Forum on Philanthropy and the Public Good, says in a Nov. 27 New York Times opinion piece. The problem, Madoff says, is the near doubling of the standard deduction. With all of the other itemized deductions either going away or constrained by new caps, most households will opt for the standard deduction rather than continue to itemize. That renders the tax deduction for charitable giving nearly meaningless. As Madoff puts it, “A vast majority of American taxpayers would no longer itemize and therefore would receive no benefits for their charitable giving.” That argument might sound familiar. It’s the same one NAR is making about homeownership. Under the Senate bill, the mortgage interest deduction would be left intact, but the deduction for state and local taxes would go away. In the House, MID would be limited to mortgages of $500,000 and the deductions for property taxes would be capped at $10,000, while the deduction for state and local income and sales taxes would be entirely repealed. So, while MID is preserved, either entirely or in part, very few households that itemize today would continue to do so. As a result, MID would continue to be a benefit only for the wealthiest households. Given the structural changes to the tax code lawmakers have before them, preserving the deduction for charitable contributions is mostly meaningless. This is exactly the same thing REALTORS® are saying about tax incentives for homeownership. They’re meaningless for most households if tax reform passes in its current form in both the House and the Senate. More on tax reform’s impact on homeowners in The Voice for Real Estate.

Largest part of La Honda preserve now open

Midpen Open Space District welcomes visitors to 2,100-acre cattle grazing site In an effort to preserve picturesque cattle grazing grounds, commemorate times past and enhance recreational opportunities, a new section of the bucolic La Honda Creek Open Space Preserve is now open to the public for the first time. Starting Friday, Dec. 1, the Midpeninsula Regional Open Space District is welcoming visitors to a 2,100-acre lower section of the nearly 6,100-acre preserve along the hillside overlooking the coast. Only a smaller northern portion of the site is currently open to the public so long as they request a permit in advance. Now, a new 6-mile trail, parking lot and free access from dawn to dusk will be offered to hikers and equestrians, said district spokeswoman Cydney Bieber. The Lower La Honda Creek Open Space Preserve will also mark Midpen’s second area that blends cattle grazing alongside recreation. The move continues long-standing ranching traditions on the coastside that support management of healthy grasslands, she explained. “We’re becoming increasingly distant from where our food comes from and the historic use of the land. This land had been used for generations and generations for ranching. This is an opportunity to see what that looks like,” Bieber said. Midpen’s $1.2 million project included creating a new 22-space parking lot where the trailhead meets at Sears Ranch Road. The six-mile trail stretches through forests, creeks and ranchlands with panoramic views. Preparing the site included installing informative panels, preserving habitat and restoring a pond, she explained. The expansive hillside is home to the threatened California red-legged frog and potential habitat for the endangered San Francisco garter snake. Part of the site also encompasses the San Gregorio watershed and Midpen will be able to help preserve clean water for that coastal area, Bieber said. Hikers can park off Sears Ranch Road and meander along the trail that is primarily out and back. A small section known as the Folger Ranch Trail creates a loop at the end of the path but will close seasonally due to weather. Equestrians can apply for a free permit to park at a different lot before taking a 1.2-mile trail into the preserve to meet up with the main Harrington Creek Trail, Bieber said. The work was supported by Measure AA, a $300 million general obligation bond approved by voters in June 2014. The measure levies a property tax on those in the special district’s territory, which includes 17 cites in San Mateo, Santa Clara and Santa Cruz counties. With development pressures abounding, the ability to preserve 2,100 acres of open space is a unique opportunity. The achievement was celebrated Thursday with a ribbon cutting ceremony leading up to Friday’s opening of the largest section of the preserve for the public to enjoy. The vast grassy hillside is grazed by a local rancher who received a contract with Midpen in 2014 to move his cattle along the property. Midpen acquired the site in 2006 for $9 million from the Peninsula Open Space Trust, she said. While the cattle aren’t expected to be interested in visitors, Midpen is encouraging the public to appreciate them from a distance and hikers must remain on the trail. The site was once managed by the Driscoll family for generations and used for cattle grazing, Bieber said. “Our goal, especially with lands in the coastal areas, is to make sure we’re able to maintain historic usage of them, which is why this preserve will have active cattle grazing,” Bieber said. “That’s really important to us to maintain those agricultural uses that have been used in the past.” In 2012, Midpen approved a 30-year master plan for the La Honda preserve and is striving to make improvements to open more of the entire coastal property to the public. As studies show spending time in nature has immense benefits for a person’s well-being, Bieber said preserving lands for recreation is vital to the community and the planet. “These open space lands are the life support system of the planet. They provide clean air, they provide clean water, they provide a place for people to get away from their hectic lives and convene with nature,” she said. “Our preserves are one of the places in the Bay Area where people can do that, they can get away, they can experience the land around them and how it used to be used for many years.” Visit openspace.org/preserves/la-honda-creek for more information. samantha@smdailyjournal.com (650) 344-5200 ext. 106 Twitter: @samantha_weigel

Last Minute Holiday Gift Ideas

Holiday shopping can be a source of stress for anyone, but particularly for procrastinators. Need some last-minute gift ideas? Think about readily accessible, yet thoughtful items that don’t require a lengthy shipping process. Let these five ideas help solve your eleventh-hour gift-giving woes. 1. DIY-It. DIY gifts can be heartfelt, and many items can be made in a pinch. Bake a tray of Christmas cookies and tie them up with a bow; make seasonally scented homemade candles; or knit a scarf. The possibilities for crafty folks are endless. 2. Get Accessorized. Don’t get stumped. Consider a classic fashion accessory, such as a Casio Vintage Watch, which can be found in many national retailers, in a range of affordable prices. Functional and fashionable, these water-resistant timepieces that feature both an alarm and stopwatch will complement an array of style preferences. 3. Head to the Box Office. Quickly check the schedule of your gift recipient’s favorite band, team or theater company for tickets to an experience, such as a musical, concert or game. This thoughtful gift can be purchased and received in an instant, thanks to e-ticketing. 4. Pamper Them. The holidays are stressful. Help your loved ones unwind during a busy time of year. Consider a gift certificate for a spa or beauty treatment somewhere local to your recipient. The gift can be enjoyed exactly when it’s needed most. 5. Let Them Pick. When you’re really in a pinch and you’ve waited until the last minute, don’t stress. A gift card can be a great way to show you thought of someone, without having to spend too much time or energy in search of the perfect item.

What tax reform could do to your mortgage interest deduction ROBIN SAKS FRANKEL

Taking a mortgage interest deduction at tax time has long been touted as a means of encouraging homeownership, but soon you may no longer able to. Under current law, homeowners can itemize and deduct the interest paid on their mortgages up to the first $1.1 million, if their loan is used to buy or improve a first or second home. The Tax Foundation says this is the third-most popular itemized deduction, and real estate industry professionals say it’s a much-needed incentive to encourage homeownership. But with the Republican tax reform bill on brink of passing Congress, the mortgage interest deduction may be changing soon, and it could have major implications for your taxes. What they want to change The version of the Tax Cuts and Jobs Act passed by the House reduces the amount of mortgage interest that can be deducted from your taxes from the first $1.1 million of your loan to the first $500,000. It also would put an end to allowing a mortgage interest deduction on a second home, which the current law permits. Advocates for these changes say it will encourage more people to use the standard deduction, which the new plan aims to increase, and thus simplify things at tax time. Homebuilders and realty associations decry these changes, saying that it will discourage homeownership, which in turn could have a negative financial impact for many. “Our major concern is less incentive to buy a home, which could mean lower homeownership rates in America,” says Lawrence Yun, economist for the National Association of Realtors. “Given that home values have always provided an opportunity to build wealth, we may see greater wealth inequality in the future.” What this change could mean for you If the House’s version takes hold, halving the mortgage interest deduction is more likely to benefit future homebuyers in less expensive areas. But in major metropolitan areas, homes under half a million dollars are harder to find, and the change is likely to penalize those who can afford pricier housing. The Senate’s version of the act, which is still being ironed out, mirrors the current rule, allowing for a deduction on the first $1 million in any debt used to buy, build or make a significant improvement to a main or secondary home. The biggest change in here is that if you refinance your mortgage, the interest in that debt won’t be eligible for a deduction. This version is less likely to disrupt the status quo. Geographically skewed In 2017, nearly 10 percent of all purchase loans were over that $500,000 threshold. That works out to about 215,000 purchase loans so far in 2017, according to Daren Blomquist, senior vice president of ATTOM Data Solutions. If you’re in the market for a home, you’ll probably be in the 90 percent who spend under the threshold. But that will depend on where you live. “It will disproportionally impact certain areas. Certain homeowners need to be cognizant of this,” says Blomquist. For example, most major metropolitan areas and coastal regions are pricier to live in than other parts of the country and are less likely to have homes priced under $500,000. Blomquist cites California as an example, where as many as 31 percent of the mortgage loans in the state are for amounts above that $500,000 threshold. Is this a big deal? Although real estate groups and the home-building industry have argued vociferously against changing the mortgage deduction, it’s likely that any change isn’t going to make or break your decision to purchase a home. “I don’t think it’s going to affect how consumers are going to buy homes whatsoever,” says Michael Seward, owner/broker of a real estate company in Palmer, Massachusetts. “When people buy a home they don’t do so because they’re getting a mortgage deduction.”