Post-wedding paperwork, Part II

A few days ago I wrote about adding a new spouse to the title of your home after getting married, and a reader commented that he wondered if the tax benefits provided to same-sex registered domestic partners would be the same as the benefits for married partners. I’ve done some research into the and will preface this post with a big fat disclaimer: I’m not an attorney, I’m not a CPA, I’m not a tax advisor, and I don’t play any of these on TV. I’m summarizing what I’ve found and I’m encouraging anyone who needs advice on how to hold title to real property or how to file their taxes to consult their financial gurus. There. That’s out of the way. Now, on to what I’ve found out.

Because we work in San Francisco, I will focus on California, which allows domestic partnerships as well as same-sex marriages.

In a nutshell, in terms of owning property, the demise of Section 3 of DOMA (the Defense of Marriage Act, passed in 1996 and partially struck down by the Supreme Court in 2013) has now allowed same-sex married couples to enjoy the same benefits given to opposite-sex married couples. In California, both same-sex married couples and registered domestic partners can hold title as community property with the right of survivorship. Same-sex married couples also benefit from the other 1,137 protections and responsibilities granted to married couples from the federal government.

Our reader’s question was about domestic partnership vs. marriage. He asked: “is there any benefit or disadvantage from a real estate perspective to marrying vs. remaining in a domestic partnership? Doesn’t *seem* like there’s much tax difference between the two because of our robust DP benefits here in California.” My research didn’t produce any substantial real-estate-related differences; domestic partners can hold title as community property and thus receive the tax benefits associated with that method of holding title.

So, in California, if we look just at real estate, I didn’t find any major differences between same-sex marriages and registered domestic partnerships. If any readers know of anything that I didn’t discover in researching this topic, please let me know in the comments or via email. I’d be happy to post an update if I missed anything important.

Post-wedding paperwork

Say you own a home by yourself. Then, OKCupid or Match.com or your sister or your roommate or your personal trainer hooks you up on a date that turns out really well, and time passes, and you get married. Yay! Congratulations to you and yours. (Shameless plug for happiness: I just got married at the beginning of March and am on my way through the paperwork to-do list that follows the nuptials.)

This is a real estate blog, so I’ll start with things to consider about your property now that you’re married. For the sake of simplicity, I’m going to assume that there’s only one property. If there are two: lather, rinse, repeat for home #2 (with a few modifications that I’ll mention later).

OK, you’re back from the honeymoon and it’s time to get busy. No, not like that — this is a G-rated blog! I mean it’s time to decide how you’d like to hold title to your property. If you live in California, which is a community property state, property acquired before marriage is considered separate property — i.e., it belongs to the spouse who owned it before getting hitched. If you want to own the property jointly with your spouse, you can add him or her to title by way of a grant deed that you will sign granting ownership to You & Your New Spouse, husband & wife (or wife & husband, or spouse & spouse) as community property with right of survivorship, if that’s what you choose. I’m not a tax advisor nor am I an attorney so I will say that you should seek the advice of a CPA or an attorney about how to hold title; there are some pretty significant tax implications that make this a very important decision.

How do you accomplish the change to title? Talk to your attorney or your favorite escrow officer to draw up the deed, then have it notarized and recorded in the public records in your county. A few caveats: Check with your lender to make sure that adding a spouse to title is acceptable (most lenders are OK with this but you don’t want to find out the hard way that your lender is not). Most jurisdictions do not consider adding a spouse to title as a taxable event and no transfer tax would be due, but again, it’s worth checking before you start deeding.

For the sake of discussion regarding insurance, let’s add a second property to the mix. Presumably you and spouse will live in one and rent the other. Be sure to convert the insurance for property #2 to the correct type of policy for a rental property. And it’s a good time to review the policy for the home that you’ll live in — make sure you have sufficient coverage for personal property (which might need to increase based on the belongings that Spouse moves in).

These are just a few tips for post-wedding paperwork. Let us know if the comments if you have any other property-related tips.

LED Street Light Test Program

The SFPUC currently has a pilot test program underway to test replacing the current streetlights with LED street lights. I happened to notice them last night while having dinner at a new restaurant in the Inner Sunset. The picture below is not my best work, but it does show you the difference in color temperature between the older and newer lights.

LED lights at 9th and Irving in the Inner Sunset

LED lights at 9th and Irving in the Inner Sunset

In addition to the Inner Sunset test area, they are doing an additional pilot site in Presidio Heights, on Washington Street between Walnut Street and Maple Street.

If you have been in either area and noticed the lighting, SFPUC would very much like you to take their survey about what you thought. In my family, for example, I really liked the new LED lights but my husband thought that they weren’t as bright. However, we both preferred the color temperature of the LED lights.

The SFPUC seems pretty positive on them, in addition to the energy saving advantages of LED lighting the lights also sound like they have some other slick tricks up their light poles, including the ability to adjust the brightness of the light based on pedestrian and vehicular activity at certain times of day.

All of this is a precursor to the city-wide replacement of our approximately 18,500 street lights that currently use high pressure sodium light bulbs with the LED lights. The San Francisco Public Utilities Commission says that feedback from the two pilot sites will be used in tweaking the city-wide rollout. So if you have been in either of these areas, take a moment and complete the survey.

 

San Francisco’s Fog-Free Fall Days

Fall days in San Francisco are pretty much the best weather days in existence. A perfect fall day in San Francisco is sublime in a way that I’m not yet eloquent enough to put into words.

Yesterday was the Folsom Street Fair, this next weekend is the Castro Street Fair, and all throughout the city, people are basking in the glorious rays of that golden, glowing orb that is so often concealed behind a gray layer of fog. Yes, Karl the Fog, I’m looking at you!

San Francisco marine layer. Image source: NASA

San Francisco marine layer. Image source: NASA

Here’s a quick overview from the NASA Earth Observatory that explains the why San Francisco fog is so strong (and why our fall weather is so amazingly gorgeous):

Intrusions by the marine layer—and all of the accompanying fog and clouds—are routine in San Francisco during the summer. The intrusions are caused by westerly breezes that push cold air inland to replace the warm air rising off of California’s Central Valley. As it did on the day this image was taken, the marine layer often completely envelops the Golden Gate Bridge in a thick cloak of fog and clouds.

In San Francisco, fog is most common during the summer due to a combination of environmental conditions that cause wind patterns and ocean currents in the North Pacific to play off one another. One of the first steps involves the northward migration of the Pacific High, a high-pressure weather pattern that strengthens and moves toward the coast in the spring and summer. The high causes wind patterns to shift, which in turn affects the California Current, a major ocean current that flows from British Columbia south along the Pacific coast.

During the summer, the strengthening of the high pushes the California Current’s surface waters away from the shore. As this happens, deeper, colder water rises up to replace it, a process called upwelling. Upwelling causes water temperatures in the Pacific to be frigid, but biologically productive. When sea breezes blow over this cold water, water vapor is forced to condense out of the air, forming advection fog. A different type of fog—tule fog—forms in San Francisco during the winter due to a separate set of meteorological conditions.

 

From Outlaws to Overachievers?

San Francisco has always had a reputation as a dynamic and diverse city. Since gold became the new black back in 1850, SF has continued to evolve and change.

The fine folks at The Atlantic Cities have a great article up about where college graduates are heading for jobs. I mention this only because the San Francisco MSA ranks as the fifth best-choice for recent college grads when you look at the number of jobs available as a ratio of total area population (the article terms this measure as location quotient), while Silicon Valley ranks as the number one best area for a recent college grad looking for a job.

Given the number of shuttle buses that frequent San Francisco in the morning and evenings, it’s a safe bet that many of those newly employed Silicon Valley twenty-somethings are living in the city.

San Francisco was once a blue-collar city that had a reputation for being particularly tolerant. But we are no longer that blue-collar industrial city that helped power America’s win in World War II. Nor are we the San Francisco of the late 1970′s, where Harvey Milk was the first openly-gay elected politician in America.

But what about our city policies? Are they designed for a different era?

For example… rent control. When our new arrivals aren’t outlaws seeking the refuge of a sanctuary by the bay, but instead well-educated college grads pulling down an average hourly wage of between $40 – $48/hour (per the Atlantic Cities article), what is rent control accomplishing?

We are no longer an affordable city, and we haven’t been for quite some time. Rent control, as currently written, offers absolutely no help to new arrivals because rent resets to market rate when a new tenant signs a new lease. Rent control in San Francisco favors those that have been here a long time.

Are we governing with a view towards the future, and a clear idea of the city we want to become? Or are we governing with a view towards the past, looking in the rear-view mirror with nostalgia for a city that we’ve already left behind…

Hetch Hetchy, Yosemite, and the Rim Fire

I have to say that reading news about the rim fire leaves me feeling very disconnected from the world.

Hetch Hetchy is where most of San Francisco’s public water comes from, and to have an enormous fire raging at its banks while I blithely go about my domestic chores of bathing, washing dishes, and doing laundry feels very, very strange. Not that going without a shower and letting dried food accumulate on my dishes would somehow help put the fire out, but the disconnect is very troubling.

Hetch Hetchy Reservoir

Hetch Hetchy Reservoir

I’ve had the pleasure of spending time at Camp Mather, which was originally the worker’s camp for the building of the Hetch Hetchy dam and was then passed to the City/County of San Francisco. It’s a summer camp for the city, and if you’ve never been I highly recommend it, particularly if you have kids.

The latest update I received from SF Parks and Rec said that the rim fire has made it to the edge of Camp Mather, but at this time no structures or buildings were threatened.

The country where this fire is burning is incredibly gorgeous, but also incredibly rugged and steep. I’ve ridden my bike from Camp Mather to Hetch Hetchy, and the road itself is rather steep and winding, not to mention the mountains and hills that it is cut through.

Hetch Hetchy, Camp Mather, Yosemite – three absolutely gorgeous and important places to San Francisco. And yet, I’m willing to bet that almost every San Franciscan got up this morning and went about their business as if nothing was abnormal, as if an enormous fire wasn’t lapping at the banks of our water supply. As if a cherished summer camp wasn’t at risk of being seriously damaged.

Is this just part of the city/country disconnect? I’m curious how you’ve been feeling and what your thoughts are on the rim fire.

 

Is it a Bubble?

Is it a bubble? I can’t tell you exactly how many times I’ve answered that question in the past two weeks, other than to tell you I’ve answered that question a lot.

The short answer: No.

Jellyfish from the California Academy of Sciences

Is the SF real estate market a bubble? – The longer Answer

Yes, we’ve had an incredible return of buyer demand coupled with low inventory on the seller side. Which has resulted in some jet-fueled appreciation over the past several months. A single family home in Mission Dolores that listed for $1.250 million and sold for $1.800 million comes to mind. As do a bunch of other properties that similarly went for a phenomenal amount of money over the asking price. So, what’s going on?

First: The Pivot
The San Francisco real estate market changes quickly. While I’ve never worked in another geographic market, my peers across the country tend to agree that SF is a rather mercurial market. Much like Project Runway or fashion, one day you’re in, the next day you’re out. We had a very sharp pivot at the beginning of this year.

Second: Appreciation
Thanks to that sharp pivot and all of the cash in San Francisco (1/3 of condo sales this year have been all cash, for example) prices have been on a very rapid, very sharp upward surge.

Third: Plateau
I honestly think that we are about to hit stage 3, the plateau. Even if no one needs an appraisal, there comes a point at which even San Francisco buyers decide the market is too expensive. So buyers start to back-off. Usually, often roughly at the same time, other property owners in SF neighborhoods start to realize what their home is worth. So it’s pretty typical to see an increase in inventory at around the same time buyers start to reign their bidding in. Which usually results in a market where prices plateau at their new “equilibrium” for a period of time.

Fourth: ?
What comes next after the plateau is most likely more appreciation. Given the number of buyers in the market, consumer sentiment about the economy, historically low interest rates, and a historic lack of supply in San Francisco the reasonable expectation is for prices to continue climbing. How far they climb, and at what speed, is the open question.

What are your thoughts on the SF market? Unsustainable? Headed for a correction? Just getting started? We’d love to hear your (civil) thoughts in the comments below!

Google Chart Test Post

Test chart post

The google chart should go here:

 

Two years, +7.4%

Almost every time Matt and I sit down with new clients — either buyers or sellers — the question comes up: “Is every property selling over the asking price? Are we back to that market?”

That market — the overheated market that came to a rather unceremonious end with the financial implosion of 2008 — saw double-digit price increases from one month to the next. Yes, some neighborhoods saw values go up 10% from one month to the next. The market saw many buyers writing offers with no contingencies at all, not even for inspections.

But that was then and this is now, and in between, some things shifted quite dramatically. Fast forward from September 2008 to September 2010, when the average ratio of the selling price to the original listing price in San Francisco was 95.4%. This statistic was drawn from MLS records of sales citywide of condos and single-family homes, not including TICs or unit buildings. Walk forward a few more months, to January 2011, when this ratio was down to 93.3%.

To say the least, these numbers were not very San Francisco-like, considering the relative strength of our real estate market over the decade prior to the 2008 financial market drama. Throughout 2009 and 2010, the market in San Francisco shuffled along with many homes selling under asking, inventory shrinking as owners who had the option of waiting to sell keeping their homes off the market, and buyers looking for great bargains.

But look what started to happen in 2011:

 

There were a few blips along the way, but the ratio of the selling price to the original listing price has steadily climbed through September 2012. As of September 30, the ratio is 102.8%, the highest it has been in years.

There are a number of factors at play here, some anecdotal and some measurable. First, anecdotally, after a few years of buyers not being sure that they would have a job in the coming months, buyers now seem to be much more confident overall about their financial situation and their job security. The measurable stuff comes into play, as well: the stock market is up, interest rates are lower than they’ve ever been and contrary to some beliefs, it’s very possible to secure a loan to buy a new home.

2012 has seen a very robust real estate market in our beautiful city. I hope the ratio doesn’t go up so much that we find ourselves in an overheated market again. What this says to me is that it’s a better time than it’s been in years to sell a property. Buyers might be faced with a more competitive landscape, depending on preferences about property types and neighborhoods, but with money being as cheap as it is, it’s still a good time to be a buyer in San Francisco.