Sunday, December 18, 2005

Letter to the Editor

The wiki letter was sent today to the editor of the Marin IJ. I seriously doubt they will publish it as they seem to be favoring a more one-sided, dismissive approach utilizing ad hominems. But we'll see as I don't want to dismiss the IJ just yet. Below I reprint the letter that was sent so that we can compare it word-for-word with whatever (if anything) the IJ publishes:
Dear Marin IJ editor:

This letter is in response to the two Letters to the Editor in your Sunday Readers' Forum (http://www.marinij.com/letters/ci_3299992 ), one by Jack McLaughlin and the other by Jim Taylor, as well as your article entitled "Blog jabs at Marin real estate 'bubble'" by Keri Brenner (http://www.marinij.com/marin/ci_3283644).

Despite the well-intentioned yet nevertheless modest donations made towards affordable housing by realty groups and others, the negative social implications of this housing bubble for many families in Marin and the greater Bay Area (and not just those of the poor) are very real, persist, and have escalated with each passing month. In fact, the California Association of Realtors estimates home affordability at an all-time low. Despite the claims of so-called "experts", we find it very dubious to connect today's housing prices with the supposed strength of our local economy or phantom demand. With the median-priced home in Marin doubling since 2000, have we seen a corresponding increase in wages among Marin residents? Is speculation the sort of "demand" that realtors refer to when they speak of "supply and demand"? Has Marin become twice as nice as it was just a few short years ago? Nevertheless, if we are to believe what we are told that Marin housing prices will only rocket (inexplicably) upwards, ad infinitum, who will buy these homes? Certainly not our adult children!

If Marin becomes a progressively less attractive home to working professionals, how will that change the demographics and the future of our community? In a future Marin, where many professionals and families have left for a better quality of life elsewhere, who will remain? Is that the future we want for our community? Is that going to be our legacy? Our concern is that people who have been scared into buying now "before it's too late", may face long-term financial instability especially if they have taken on risky mortgages. For those individuals who have advised home buyers to take on risky debt, speculating on the future, and/or being reliant on future appreciation, do they bear any responsibility at all to their community? Or is it simply "profits come first, people come second"?

Many of us believe that housing prices have been pushed well beyond any semblance of reasonableness and the dictates of healthy market fundamentals due to excessive liquidity, extremely relaxed lending standards, a speculative mania, and the increasingly irresponsible "cheerleading" of vested interests. After the dust settles and people look back upon this extraordinary period of history, who will be vindicated, who will be vilified, and how will we appear to our children? Certainly those who have their community's best interests in mind and who seek to inform the community will be remembered well. That has been and will continue to be the intent of this blog.

Sincerely,

Marinite, Marin County
Robert Daumier, San Rafael

8 Comments:

Blogger marin_explorer said...

FYI, here's another letter sent to the IJ, stating the blog's case on 12/13. If you're a visitor who found this blog through the IJ, you may note our attempts to engage this paper on the issues, versus running with inflammatory comments. Sofar, there has been no response to the letter posted below.

Marin IJ:
As one of the contributors to the Marin Bubble Blog, I would like to say the purpose of this blog is to provide readers with information pertinent to the Marin real estate scene. We do not intend to make the blog a personal issue between ourselves, IJ staff, realtors, or any other parties. That is not the point; the information we present should speak for itself. Any professional should respect a person's desire for anonymity when addressing controversial subjects, for reasons including those given below.

We welcome discourse on the articles, data, analyses, and commentary presented on our blog. All contributions are welcome, provided they stay on subject and don't cast vague aspersions on any individual. We strive to uphold our quality of information, and welcome your engagement to that end.

Dec 19, 2005, 10:48:00 AM  
Anonymous rejunkie said...

So, rather than constantly blame the Federal Reserve, the realtor community, the lenders, the appraisers, the investors, the speculators, the RE shills, the builders, the local government, and in some cases, ourselves, for this situation, how about some suggestions as to how to reign in the price increases?

I have posted elsewhere what could be done from a taxation standpoint that would cool things down. We know that the local governments (and voters) make it extraordinarily difficult to get anything developed here. I have heard this drumbeat now since the early 90s when the median was 1/3 what is today and the situation only worsens.

So what is the solution? What can we do locally or possibly at a state level, that would discourage speculation, encourage infill development in Marin (with the requisite transportation improvements) and generally improve the quality of life for those who live or work here?

Might I suggest that we wiki ourselves a letter to Joe Nation, the county board of supes and every mayor in Marin County with the suggestion that there are very disgruntled voters (and in my case, the owner of 3 houses in this county) who don't believe that the current prices are justifiable, do not serve the greater good of the community and will eventually turn Marin in to a community of rich old people serveda by people who face a lifetime of renting?

I have a few suggestions on what could moderate things:

1. A significant transfer tax (1-2%), levied on every sale and chargeable to the seller, that goes to offsetting the costs of providing housing which could be used towards builders fees for low income housing, for instance. By my estimate, this would generate $22m a year (2500 houses change hands * $900,000 median * 1%) and would discourage flipping by raising the transaction costs.
2. Remove Prop 13 rules for commercial property -- this is just stupid that we artificially hold down property taxes for businesses and investors. Keep it in place for homeowners. Revenue generated should be substantial.
3. Encourage infill development of high density housing near transit centers. There have been significant strides in that area (much of downtown San Rafael, for instance) but there are still alot more McMansions built in Marin than there are condos. For instance, nearly all of the redevelopment of Ignacio, where once existed modest military housing, is big houses on small lots selling for $900k+ that are poorly served by public transportation. This could hardly be described as workforce housing. A squandered opportunity, IMO. High-density infill also has the added benefit of being better for the environment. While many builders claim they are just responding to market demands and that may be true (no accounting for taste, I guess), I would surmise that a greater proportion of high density condos would only help depress the median. Certainly, a 1000sf condo would be a step closer to homeownership for many than a 2500sf McMansion.
4. Make "no doc" loans illegal. This practice allows you to basically lie about your income in order to borrow more than you would qualify for. The lender charges slightly more for these loans (1/4%) to cover the risk to them but they facilitate speculation by allowing anyone to buy anything regardless of whether or not it is financially possible. (not sure if this could be achieved at a local or state level).

It would take a courageous politician to put forward some of these ideas -- perhaps if they hear from enough of us, they will run it up the flagpole? Or am I being naive? Is the political clout of realtors, lenders, developers and our NIMBY neighbors so great that we can only shrug our shoulders and let the inevitable occur?

Dec 20, 2005, 9:08:00 PM  
Anonymous Anonymous said...

Get rid of Prop 13 altogehter and replace it with a flat tax on all residents regarless of ownership status. Why should renters freeload?

Dec 20, 2005, 10:43:00 PM  
Anonymous Anonymous said...

Getting rid of Prop 13 is a sensible move. It would reflect the current state of real estate picture. However no politician would initiate this proposal. It is a poison pill to their political career.

Dec 21, 2005, 8:47:00 AM  
Blogger marin_explorer said...

how about some suggestions as to how to reign in the price increases?

Personally, I think the best way to that end is for the market to eventually correct itself. Granted, there are issues endemic to Marin that need to be tackled by the local govts., but I think there's generally a similar problem across the Bay Area, if not California.

I'm of the opinion it will be a slow, painful process downward, one involving foreclosures, economic upset, and a gradual exodus from high-overhead locations to cities that can provide a more sustainable economy. Once again, local govts. will be short-sighted, responding only once the problem is obvious to all. The market will lead, reactions will follow. Perhaps I'm a cynic, but I think pragmatism first requires financial hardship.

Dec 21, 2005, 12:59:00 PM  
Anonymous rejunkie said...

Anonymous-

Renters, like buyers, pay whatever the market will bear. Theoretically, rents are held down slightly over time based on assessments (pegged to inflation) lagging actual property values , so in that sense, I think Prop 13 indirectly helps the working poor. I guess you could call this freeloading.

Also, the original intent of Prop 13 was to prevent people on fixed incomes from having to sell their homes in order to pay rapidly escalating tax bills, well, and to just have everyone pay less tax. This was authored by the notoriously anti-tax Jarvis-Gann duo, after all. Nonetheless, if you owner a $500k home here in 2000 that is now probably approaching a $1m, your monthly tax bill would have also doubled in lockstep with the price increases, were it not for Prop 13 -- roughly 15% increase every year for 5 years, on a number that started at around $500/month. This is difficult to budget for no matter what type situation you are in.

So, despite the havoc it wreaks on public schools and local spending, I do understand the benefits of prop 13. Having said that, it should be repealed on commercial property as you are not going to be throwing little old ladies out of their homes by keeping taxes on commercial property in line with assessed values. Futhermore, I think that it is politically viable, whereas repealing prop 13 outright is definitely not.

reskeptic, I do agree with you that it will probably correct itself but Marin will never be an affordable community. My thoughts were how to better accommodate the working poor in our community and simultaneously disincent speculation. Again, I realize that the odds are against any politican taking this on, but I thought there may be some poltically viable ideas that we can forward to our local politicians.

Dec 22, 2005, 9:13:00 AM  
Blogger marin_explorer said...

Rejunkie-
Perhaps much of Marin real estate will always carry some premium, but I should add that real estate as a whole was far more affordable as recently as 5 years prior. And not just for the "poor," but across the spectrum of incomes.

As the Marin POS blog attests, there are plenty of homes that do not merit a "Marin premium." Someday, when prices are once again supported by economic realities, I suspect we'll then be able to discern the present situation more clearly. Meanwhile, if housing continues to climb, who will move here? There are far better options for most professionals. Ultimately, it's not just revenues from property taxes that will be affected, but lower tax revenues from an altogether depressed economy.

From my perspective, Marin's infrastructure as a whole is in sad shape, and if that's the best management local governments can do presently, what happens when the economy goes south? I agree this place is due for some reform. However, we might not wait around for things to improve.

Dec 22, 2005, 10:01:00 AM  
Blogger Ali, in Cali said...

"Get rid of Prop 13 altogehter and replace it with a flat tax on all residents regarless of ownership status. Why should renters freeload?"

Freeload? Don't be absurd. I am pretty sure my landlord pays those taxes, and includes it in the amount of money I am paying him in rent. The government will see to it that someone is paying, and when it trickles right down to it, I, as a lowly "freeloading" renter, am one of the someones. Maybe I don't write a quarterly check directly to the state, but we all pay to live on this land, one way or another.

Aug 15, 2006, 12:56:00 PM  

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