Mortgage Interest Deduction vs Standard Deduction

The president’s tax proposal released last month has caused some worry among home owners. DISCLAIMER: This article is based on my opinion and not fact, you should always consult a tax professional for advice before making any big financial decisions. The proposal would double the standard deduction. This would threaten to nullify the mortgage interest deductions enjoyed by some home owners currently. While this may be true, in my opinion the increase in standard deduction is a good thing for most tax payers.

The increase in the standard deduction can go one of two ways for any given tax payer or family. In the first and more advantageous scenario, the increased deduction would reduce your taxable income, resulting in a decrease in what you owe in taxes. This would be the case if your itemized deductions were now less than the new standard. On the other hand, if your itemized deductions were still more than the new standard deduction, it would have no affect on your taxable income.

This brings up the question, would decreasing the usefulness of the mortgage interest deduction negatively impact home values? In my opinion, it won’t have any noticeable impact and tax deduction of mortgage interest is one of many advantages of home ownership. I believe there are other equally (if not more) important reasons to purchase a home, such as financial gains, pride in ownership, and the security owning offers versus renting.

In addition, if a buyer of a typical house in Sunnyvale were to use conventional financing, they would most likely still be writing off more than the increased standard deduction in interest alone.

AB71 Tax Bill

AB71 is a bill proposed by the head of The Assembly Housing and Community Development Committee, David Chiu. The bill would eliminate mortgage interest deductions on second homes. The increased revenue would help provide more low income housing tax credits. While this is a good thing for low income housing, it does pose a problem in other areas.

It is estimated, that if the MID were eliminated on second homes, sales would drop by 2,152 homes in the first year. Because of this the state would lose an approximate $180.2 million in the first year. Many owners of second homes say they wouldn’t have bought a second home in the first place if they knew their interest deductions would disappear.

Keep in mind that not every second home is a vacation home. Someone with a one way commute of an hour or more may choose to purchase a small condo or townhouse to live in during the week. This could eliminate that option all together and force more traffic on the roads further slowing commute times.

The problem could be taken even further, people have made significant financial decisions based on the fact that the mortgage interest deduction would be there to make the property affordable. This could force the sale of second homes or other financial problems for the people who own them. In a vacation home areas of the state, homeowners are going to be hard pressed to find a buyer if the mortgage interest deduction on second homes is eliminated.

Where Is Mortgage Money Coming From?

More and more people are turning to nonbank lenders for their mortgages when buying a house. A nonbank lender is a financial institution that does not offer both lending and depositing services, such as checking and savings accounts. Home Services Lending and Quicken Loans are examples of nonbank lenders.

Since the housing crisis, banks are more heavily regulated in terms of loan conditions. This naturally caused them to do less mortgage lending over time and allowed nonbank lenders to focus on less than perfect lending situations.

Back in 2011, 50% of all new home loan money came from the three big banks. As of 2016 that number has dropped to 21%. Banks are required to follow strict lending guidelines on what and who they can lend to. Their lending approach has changed from “risk management” to “perfect loan”. Meanwhile, nonbank lenders have a little more wiggle room in what they can offer.

Of course borrowers should pay more attention to things like mortgage rates and loan terms  than what type of lending institution they choose for their mortgage.

Silicon Valley Clean Energy

In December of last year Sunnyvale voted 6-0 to implement Silicon Valley Clean Energy’s new GreenPrime 100% renewable energy program. Starting in April of this year all of the city’s energy will come from renewable energy produced by sources like wind and solar. Campbell, Cupertino, Morgan Hill, Mountain View, and Saratoga have committed to the program along with Sunnyvale.

Beginning in April customers in SVCE’s service area will automatically be enrolled in a program called GreenStart which will be 100% carbon free and consist energy produced by hydroelectric, wind, and solar. You will also be able to opt in to the GreenPrime program which they state is 100% renewable and 100% carbon free for a small added cost.

All this will still be delivered through PG&E existing infrastructure and will still be billed through PG&E as well. GreenStart’s electricity will supposedly cost about 1% less than PG&E’s generation rates. Instead of PG&E’s current 30% renewable and 60% carbon free you would be 100% renewable and carbon free.

GreenPrime will cost between 5% and 15% more than GreenStart. The average residential customer using approximately 460kWh per month would pay an approximate $3.22 premium for the GreenPrime Service.

By switching to the GreenPrime program the City of Sunnyvale will be spending around $141,000 more per year on the 15.7 million kWh of energy used for streetlights, parks, government run buildings, and utility operations. This money would come mostly from the city’s general fund and the rest would come from the sewer and water funds.

Peery Park Specific Plan

On September 20, 2016, Sunnyvale’s City Council adopted The Peery Park Specific Plan with a vote of 6-0. The plan outlines the development of 180 properties that make up the approximately 446 acre area known as Peery Park.
Peery Park is comprised mostly of industrial area and office buildings, housing large companies such as Apple, HP, LinkedIn, and Synopsys. The area is roughly bordered by Highway 101 to the north, the city of Mountain View to the west, the railroad to the south, and Mathilda to the east.
The plan governs the type of land use in the area and includes some areas that have been rezoned. There are plans to implement significant visual enhancements and improved transportation functionality down Mathilda and Mary Ave as well as other streets in the area. These enhancements include reconfigured parking and bike lanes down certain streets, as well as tree-lined landscapes down the median. It also includes possible plans to extend Mary Avenue further north, giving it a connection to Moffett Park.
Another interesting part of the plan is the $400,000 that has been allocated to a two year provisional shuttle program. The program is free for passengers and is planned to start service in late 2017. The shuttle will travel the perimeter of Peery Park, through downtown Sunnyvale, and down the El Camino.
Part of the plan that did not make it passed the vote was the proposed pedestrian and bicycle pathway connecting the neighborhoods at Ferndale and Duane to Mathilda, close to public transit stops. This would have caused the existing sound wall to be opened and would have potentially lead to people parking in residential areas and then walking to work.
Check back in the future for more in depth articles on the Peery Park Plan!

Sunnyvale Town Center & Redwood Square Plaza

Last month on October 19th, STC Venture broke ground and resumed construction in downtown Sunnyvale. The town center construction project was put on hold back in 2009 when Sand Hill Property Co. and RREEF defaulted on a 108.8 million dollar loan. The property was then bought by Wells Fargo at auction in 2011. Following that a law suit against the bank was filed by Sand Hill further stalling the continuation of the project until 2015. The suit was ruled in favor of Wells Fargo finally allowing them the sell the property.

Currently the project continues to reflect the original plan from 2007. Everything that is already built will stay with the exception of the steel frame work in the Redwood Square Plaza. The plan is to demolish the structure and add temporary parking along with reopening the plaza next year. New plans for that block will be submitted for review as well.

A theater is currently planned on the corner of McKinley and Sunnyvale Ave. on the Target side of McKinley. It will sit on the second story above retail space and backs up to the already existing parking garage. The theater plan includes multiple screens with up to 2,950 seats. The plans don’t specify how many screens there will be but my guess is around 12.

Across the street from the theater, the purposed plan is to build two stories of retail space totaling 29,500 square feet that backs up to a five story parking garage where the current parking lot sits. They also plan to add one level of retail space on the opposing side of the parking lot, facing Washington Ave.

Five levels of residential units are planned for the area along the side of the parking structure that is bordered by Iowa Ave. and Taaffe St. And two levels of retail space is planned for the vacant area at the corner of Mathilda and McKinley. Also included in the plan is to extend Murphy St. through the new development to McKinley Ave.

What’s Happening to Mary Ave

So I’m sure you have seen the construction going on down Mary Ave. And I’m sure most people have googled what the plan is, but if you haven’t hopefully this article will shed some light on the plan for the upcoming months.

The city of Sunnyvale has been planning to add bike lanes down Mary for some time now, a quick search of the internet will show articles dating all the way back to 2009. It’s been a topic of much debate on the usefulness of reducing the number of traffic lanes on some parts of Mary to make bike lanes possible. I won’t get into my opinion on the topic. Frankly I’m pretty indifferent my commute tends to be opposite of traffic so it’ll have little effect on my life. It will however make the option of biking to my destination a little more safe feeling.

The plan breaks Mary Ave down into four sections, with the total effected area stretching from Fremont Ave. to Maude Ave. The first section which may or may not be finished by the time you read this article is from Fremont Ave. to El Camino, the plan is to remove one lane of traffic from each direction and add a center-left lane down the middle. This will make room for bike lanes and preserve parking on this stretch of Mary.

The second section from El Camino to Evelyn Ave will be done a little different. Parking will be removed from the West side of the street and all traffic lanes preserved. The lanes will be shifted over to make room for bike lanes down both sides of the street.

The third part of this street modification and rehabilitation project is from Evelyn to Central Expressway. Again all lanes will remain but they along with the median will be narrowed to allow room for the bike lanes.

The last section to be modified is from Central to Maude. As you know there are currently 3 lanes in either direction. They plan to remove one lane from each side to add a buffer zone and a bike lane.

The hopes of this project is to encourage people to commute to work on bike more often and alleviate some of the motorized traffic congestion down Mary Ave. during commute hours.

Sunnyvale Real Estate Update – beginning of September

I know this is just a bunch of boring numbers, I will be doing a video update on youtube shortly after I post this so if reading is too boring but you do want to know about the market stats here in Sunnyvale keep an eye out for that video. I’ll link it here when its up and you can find it on youtube if you search Sunnyvale Real Estate update.

So its a new month and time for a new Sunnyvale real estate market update. In August homes on average are selling 4.4% above asking price. Indicating that we are still firmly in a seller’s market. Average days on market is trending upward since the summer months which is pretty normal for this time of year. August average is 20 days up from the 17 days in July and the 13 days for the 4 month preceding that. As a seller though as long as homes are selling above asking their is nothing to worry about, I mean whats an extra week on the market gonna hurt?

Average sale price across the board (single family, town houses, condos) in Sunnyvale in August was $1,201,675 which is holding right in line with all of 2016. Of course there is a little fluctuation from month to month. Inventory in Sunnyvale didn’t increase in August like it did the prior two months. There was 72 new listed homes and 71 sold listings.

Why didn’t my home sell?

So your listing expired? Now what?

You have some questions and they need to be answered. There are usually three main reasons why your house didn’t sell and its usually a combination of them. There is a buyer for every house, if your house didn’t sell its one of the following that didn’t work: the house, the agent, or the price. Let’s look at them all in a little more detail.

So your home usually isn’t the problem, this is normally tied in with the asking price being wrong. The reason the house gets its own paragraph is if isn’t show in the best light it wont get what its worth. Now to explain that further, an outdated house or a house that isn’t staged properly won’t typically get sell for maximum value. Of course you’ll have to lay out some money up front to “freshen” up the house but the higher selling price it will bring is well worth the effort. Staging is another area that will help the house sell for what its worth. Presenting a home and living in it tend to look very different. The goal of staging is to help the buyer see the house for its true potential and visualized themselves living there.

Now the price is a very important factory in sell the house obviously. People tend to think there is some sort of magic when selling a home that will get a selling price of more than what the house is worth. There is no magic! There are tricks to getting a higher price but they do not involve listing the house for more than its worth. People also tend to forget you don’t have to accept an offer even if it is exactly at your asking price. You can counter offer with a higher price.

Lastly the agent you chose could be the problem. Not all agents are created equal, which is a good thing. It allows you to shop around and find the agent for the job. There are a few reasons you list with an agent instead of trying to sell the house yourself but the one we want to talk about in this article is marketing. The agents job is to advertise the home to as many potential buyers as possible. Some things to remember when selecting an agent is cheaper is not always better. Marketing costs money and that money comes from the agents last commission check. There is a reason they can list your house for less, its because they do less to market your house. Thats not to say all agents that insist on a full commission will market your home properly, but there is a better chance, its up to you, the seller, to judge whether they will be capable of doing the job.

So if your house didn’t sell its most likely a combination of the above. Everyones selling situation is unique, and I hope this information will help you to better set a price and pick an agent in the future. And if you’re in the south bay and need someone to come list your home I’d love to interview for the job. You can find more about me and my services on my personal website at Even if you don’t live in the south bay, if you have any questions don’t hesitate to get in contact with me!

Townhouse vs Condo and HOA info

When you’re in the market for a home you will surely run across the different classifications of homes. And I’m sure you will have questions about the differences and the pros and cons of each. Hopefully this article will shed some light on the differences and you can make a decision on which is best for you.

We don’t have to talk too much about what a detached single family home is, its pretty self explanatory. There are some things to remember about them, while they are the most private type of dwelling in a city environment you have the most responsibilities and highest up keep costs. In a detached home all of the maintenance expenses are yours. From the small end, for example, you have a leaking pipe or a plugged sewer line you have to pay the bill. To the big end of things, like your house is sinking and going to crack in half the expense is all yours.

On the opposite end of the housing spectrum is a Condominium, which has the least amount of cost outside of your association fees. In a condo all you own is the inside of your unit, so paint on the interior walls and ceiling, the carpet/hardwood/tile, and the air space inside. Which is great because you don’t have to worry about landscaping or maintenance problems in the plumbing or anything that doesn’t involve the inside of your unit, saving you money and the hassle of dealing with contractors or maintenance people.

A Planned Unit Development is something right in the middle, you own the land and the unit that sits on it. You still with have your home owners association fees which cover different things based on the rules in whats called the C,C,andR’s. Some HOA’s (home owners associations) cover exterior walls and paint and landscaping and others only cover the community pool and street maintenance and street light electricity. HOA’s are tricky things to interpret, and some are better than others. They are a big part of the buying decision and should be discussed with your agent before deciding on making an offer.

I get asked a lot what the difference between a town home and a condo is, the best way to answer that question is with an explanation of what a town house is. A town house is an architectural style not a housing classification. This means a condo can be a town house and a planned unit development can also be a town house. It has become a popular generic term to describe non-detached homes which causes all the confusion.

I hope this helped  removed some confusion from the subject. I’ll eventually write more articles that go into further details on each kind. If you have any further questions in the mean time, feel free to contact me, I would be happy to help.