Breaking Up is Hard to Do

Divorced Ryan Hambry and Morgan Dickson have dinner
together with their children at their Florida house once a week

The cliché about the economics of marriage--"two can live as cheaply as one"--remains true even though the marriage is over. Some divorced couples continue to live together because their housing costs would rise substantially if they were to sell their house with a low-interest mortgage.

For divorcing couples, there is a particularly tricky version of what housing professionals call the “lock-in effect,” where homeowners stay in place because they don’t want to give up their low rates. Across the housing market, the lock-in effect prevented almost two million home sales between mid-2022 and mid-2024, according to Federal Housing Finance Agency research. The number of people moving is significantly lower than it was before the pandemic, according to Bank of America.

Some ex-spouses are choosing to “nest,” an arrangement in which the kids remain in the family home and the parents rotate in and out. The practice has been around a long time, but it has gained popularity as the costs of moving have risen, according to family-law attorneys and mediators.

There are compelling short-term financial reasons for not cutting the cord completely, but keeping the family house under joint ownership will make it difficult to find other partners, relocate to other cities, and move on with their lives.

Mortgage Occupancy Fraud

The top of the mortgage application requires the borrower to declare
the loan's purpose (primary residence, secondary residence, investment).

The Trump Administration is investigating three outspoken political opponents, California Senator Adam Schiff, New York Attorney General Letitia James, and Federal Reserve governor Lisa Cook, for the possible crime of mortgage occupancy fraud. Claiming that a loan is for one's principal residence (versus a vacation home or a rental property) allows the borrower to have both a lower interest rate and a lower down payment, and it has been alleged that these three knowingly lied on their applications. [bold added]

Lenders typically offer better terms on mortgages for a primary residence, and let people borrow more than they would for a second home or an investment property they may rent out.

For a primary residence, for instance, the down payment can be as low as 3% to 5%. For a second home, typically 10% to 20%. For an investment property, it is usually at least 20%.

Mortgage rates for a second home are also typically 0.25% to 0.50% higher than the rate for a primary residence, said Garth Graham, senior partner at Stratmor Group, a mortgage advisory firm. The rate is usually 0.50% to 0.75% higher for an investment property.

The average rate on the standard 30-year fixed mortgage was recently 6.58%.

Another reason people might want to claim a second home as a primary residence: Nonowner occupied properties often have higher property taxes and higher insurance premiums than primary residences, said Jon Goodman, a lawyer with a specialty in mortgage fraud.

The crime is difficult to prove, partly because it is allowable to apply for a loan on a new primary residence while living elsewhere (for example, I want to move to a new purchased condo in Arizona first, then sell my California home), and circumstances may have changed (I don't like my retirement choice after all and will continue to live in my current home). In the latter case, the bank will not normally change the loan terms as long as I continue to make the payments.

Mortgage occupancy fraud is rarely prosecuted, and most real estate participants know this. Checking the wrong box can save thousands of dollars each year. Doing the right thing when there is hardly any penalty for doing the wrong thing and it's highly unlikely that one will get caught anyway is a true test of character.

Even Billionaires Want to be Accepted

The Zuckerbergs bought 11 homes in Palo
Alto to construct their compound.

Where does a billionaire live?

(It's the answer to the old elephant joke riddle "where does an elephant sit"?)

Answer: anywhere he wants.

In Mark Zuckerberg's case he and his wife Priscilla Chan want to live in Palo Alto in the Crescent Park neighborhood, which lies between Highway 101 and Stanford University.

he’s attempted to placate the surrounding community with an assortment of gifts.

Zuckerberg — who’s now worth approximately $257 billion — sent Krispy Kreme donuts, sparkling wine, chocolates and noise-canceling headphones to his neighbors as a form of consolation. Zuckerberg’s press representatives did not confirm to SFGATE which brand of wine and chocolate he gave to neighbors by the time of publication.

Though Zuckerberg’s $110 million project started in 2011, neighbors are reportedly concerned that it’s slated to continue. In total, he reportedly purchased 11 homes, sometimes offering owners up to $14.5 million to vacate their properties along Edgewood Drive and Hamilton Avenue. One of these properties, which operated as a small private school that included his two kids, reportedly violated city law. (In Palo Alto, a school or business cannot function inside of a home if employees do not live there and it creates substantial traffic).

Priscilla Chan and her statue (Artnews)

Overall, Zuckerberg’s luxe compound is anything but modest: it reportedly features a seven-foot-tall statue of his wife, Priscilla Chan, in a silver flowing robe, along with a pickleball court and several guest houses.

At least three Bay Area billionaires--Mark Zuckerberg (Facebook), Sergey Brin (Google), Lauren Powell Jobs (Apple)--have chosen to live in Palo Alto.

Not for them the big house on the hill; within walking distance they can mingle with the normals in downtown Palo Alto and Stanford Shopping Center. Some of the wealthy--think of Warren Buffett--don't want to lose touch with their humble origins. And they can live anywhere they want.

The Pace is Still Glacial

$700 leases you a top or bottom pod

Ten (10) months ago we wrote about a creative solution to San Francisco's cost of housing:

The reported rent of $700 per month is a fraction of the cost of a studio apartment. Even if one can afford to pay much more for housing, being a pod person may appeal to finance or engineering types who work long hours in the office and just need a place to crash and wash up.

James Stallworth and his company, Brownstone Shared Housing, were unable to achieve profitability, and the landlord is trying to evict him for unpaid rent.

Last week, Brownstone’s landlord — the Prime Co., a Kansas-based real estate developer — filed an eviction lawsuit accusing the startup of owing more than $150,000 in rent payments. The alleged debt is equal to about a year’s worth of unpaid rent, according to court records...

The eviction lawsuit comes months after Stallworth and his landlord switched to a new lease contract that pivoted away from requiring the startup to make monthly rental payments, switching instead to a “revenue sharing” model.

Per the contract, which was viewed by the Chronicle, the landlord would receive 80% of all profits generated from the sleeping pods.

The common area

While Mr. Stallworth is primarily responsible for the likely failure of his pod-rental business, the City's labyrinthine regulations must share the blame: (bold added)

San Francisco Planning greenlighted the building’s residential conversion in October, only to rescind the approval a month later, after ruling that the project didn’t meet the city’s affordable housing requirements and accusing Stallworth of misrepresenting certain details of the project.

At that point, Stallworth faced over $300,000 in affordable housing fees, payment of which the city required from all housing developers with projects of 10 or more units.

Stallworth was offered a lifeline when legislation by former Mayor London Breed exempted downtown residential conversion projects like 12 Mint Plaza from paying the onerous fees. Brownstone’s sleeping pods were approved to operate again, pending final permits from the department of building inspection.

But those permits were never pulled, public records show. Dan Sider, the planning department’s chief of staff, said the lack of permits has caused Brownstone to accrue $69,000 in penalty charges with the department to date.

With only 13 (out of 30) pods approved for rental, Brownstone Shared Housing's gross income of $9,100 per month has no way of paying San Francisco's unpaid penalties and fees in addition to the cost of operations. Even if all 30 units were approved and leased, monthly rents of $21,000 minus an 80% profit-share going to the landlord makes the business proposition very iffy. There are operating expenses, plus the cost of the original conversion, that Brownstone has to recover.

Mayor Daniel Lurie has said he is trying to make government more efficient, but the pace is still glacial.

Its Hair Was on Fire

The SF apartment fire in March, 2024 (Mercury News)

Removing ticks from a dog set a five-story apartment building on fire.

Giancarlo was just trying to help. But he set the dog on fire, the dog set the couch on fire, the couch set the curtains on fire, and before long, residents of a five-story, 114-unit apartment building in San Francisco were fleeing for their lives down a fire escape amid a blaze that sent two people to the hospital.

That’s according to a fire department report filed as an exhibit in a wrongful-eviction lawsuit against the building’s owners.

“He tried to remove the ticks using a lighter, which accidentally lit the puppy on fire,” the report said.

The lawsuit was filed May 14 in San Francisco Superior Court by a couple who claim the building’s owners delayed work to repair their apartment after the fire, forcing them to live in a home-made trailer on streets around the Bay Area. It seeks unspecified damages.

A second-floor tenant told fire investigators she had adopted a puppy in Modesto, and after she brought it home, noticed it had a tick. The woman, whose name is redacted from the fire department’s report, said her friend Giancarlo decided to use a lighter to remove the blood-sucking parasite. It was just before midnight on March 12 last year.

Giancarlo — who is not identified by a last name in the report — told investigators he found many ticks on the dog’s stomach, and that he had experience using heat to get rid of ticks.

The dog, which Giancarlo said combusted as if something flammable had been applied to it, ran over to the couch, where the tenant tried to grab it, the report said. Her clothing and the sofa both caught fire, and the sofa set the curtains ablaze, the report said.

If you are a San Francisco landlord, not only can your tenants set the building on fire but you can be sued for "wrongful eviction" if you don't make repairs fast enough. Another reason to get out of San Francisco with all deliberate speed.

Too Much, Even for California Democrats

Ash Kalra (Karl Mondon/Bay Area News Group)

The arguments for and against rent control are well known (we last posted about them in 2019). AB 1482, passed in 2019, imposed a limited amount of rent control on California landlords.

That law, AB 1482, capped rent hikes at between 5% and 10% a year, depending on inflation. It mainly applies to apartment buildings that are 15 years old or older.

San Jose Assemblyman Ash Kalra recently sought to expand rent control: [bold added]

Kalra’s bill would have lowered the rent increase limits to between 2% and 5% a year. It would have also extended the rent caps to all rented single-family homes and condos, which are now exempt unless owned by a corporation, trust or LLC. Additionally, it would have eliminated the current law’s 2030 sunset date, making the restrictions permanent.

Units under 15 years old would have continued to be exempt. Landlords would also have been allowed to charge new tenants any price upon move-in.

The bill would not have impacted local rent control ordinances in cities including San Jose, Oakland, San Francisco, Berkeley and Mountain View.

The bill’s opponents, including the state’s most powerful landlord and real estate groups, argued that additional regulations on rents would have discouraged new housing construction because they would make it more difficult for developers to turn a profit.

They also pointed to academic studies showing that in areas with rent control, tenants are less likely to move, and some landlords opt to stop renting out their units. Fewer available rentals can mean higher prices for units that are not rent-controlled, or when new tenants move in.

I know elderly homeowners who rent their homes to defray the costs of assisted living. Yes, they could sell their home and be subject to large capital gain taxes (the State of California doesn't give a break for capital gains because the taxpayer didn't "earn" the price appreciation).

The rent control expansion would have fallen largely on mom-and-pop landlords who try to rent out an older home. The proposal was too much, even for Democrats. Ash Kalra pulled his bill, but not before stating "he plans to reintroduce a version of the bill next year."

Californians keep reelecting politicians like Ash Kalra who want to redistribute wealth, and we are getting what we voted for.

Antiparochi

A train between Polikatoikies in Athens

It sounds like an Italian dish, but antiparochi is a financial device used in post-war Greece to spur the construction of millions of homes. A variant of this device could kick-start homebuilding in San Francisco and other high-cost American cities.

Antiparochi emerged in Athens from the wreckage of two world wars, after successive invasions by fascist Italy and Nazi Germany left Greece devastated. The idea involved homeowners in postwar Athens trading their land with apartment builders in exchange for a few condos in a new building, in lieu of cash. These buildings, typically four-story to six-story structures called polykatoikía, came to symbolize middle-class Athens.

Most new city housing in modern-day America involves the developer buying high priced land from a homeowner, who pays large capital-gain taxes and typically moves away. The developer earns a profit by building two or more houses, condominiums, or even an apartment building; none of these structures is low-cost because of the high-priced land.

As your humble blogger understands antiparochi, the homeowner exchanges his property to the developer in return for one or more new units. The developer, who no longer pays a high price for the land, doesn't need to sell the other new units for as high a price. Under Greek tax law, apparently, antiparochi did not result in taxes to the original landowner.

Key to making the structure work in the U.S. is the non-recognition of capital gains by the homeowner for tax purposes. Under current law only investment properties can be exchanged for other investment properties (under IRC Section 1031) without triggering capital gains taxes. A homeowner who gives up his personal residence experiences a taxable transaction, whether he receives back cash or another real estate property. (It may be true that clever tax lawyers can come up with solutions using partnerships or other entities, just as they did with a limited number of high-income individuals to work around the $10,000 SALT limitation.)

Antiparochi would only constitute part of the solution in California, however, who still would have its notorious red-tape problem. Nevertheless, kudos for creativity.

Great Moments in Real Estate Marketing

You don't need this home if Susie just wants to go to Cal (Street view/Merc)

Palo Alto homes have always commanded a premium over already-pricey Peninsula real estate because of PA's highly rated school distrct. This, however, is next level. [bold added]

A home listed for sale at $4.8 million on Friday in Palo Alto boasts that since its 2017 rebuild, the children of every subsequent owner have gone on to Harvard or Stanford, “paving the way for even greater achievements.”

“Now, it is ready to pass on its extraordinary energy to the next family,” the listing reads.

The five-bedroom, four-bathroom home appears to have been staged to highlight the children’s academic success — the framed diplomas and acceptance letters are poised above the mantel, featuring prominently in some of the photos.

That's a lot of pressure on the child. If he or she doesn't get into Stanford or Harvard (or an Ivy or MIT or CalTech), the parents will have overpaid substantially for a comparable house that they could have gotten for at least $1 million less in other Peninsula cities.

Let's hope the feng shui is strong with this one.

Blue Skies Over Union Square

Just twelve months ago JPMorgan Chase CEO and Democratic Party supporter Jamie Dimon was highly critical of San Francisco and its future: [bold added]

“San Francisco is in far worse shape than New York,” Dimon said in an interview Thursday on Fox Business.

“I think every city, like every country, should be thinking about what is it that makes an attractive city, you know, its parks, its art, but it’s definitely safety. It’s jobs, it’s job creation, it’s the ability to have affordable housing,” Dimon said. “Any city who doesn’t do a good job, it will lose its population — just tax more and more, it doesn’t work.”

560 Mission (Chron photo)

What a difference a year makes: JPMorgan to sign new lease expanding its presence in downtown S.F. office tower

JP Morgan will renew its lease for its longtime offices at 560 Mission St., committing to 280,000 square feet of office space.

The new term of the lease will be for five years in the 31-story office tower known as the JPMorgan Building. Real estate firm JLL represented JPMorgan in the deal. JPMorgan declined to comment on Thursday.

Previous reports show that JPMorgan occupied about 220,000 square feet in the tower previously, and its lease renewal represents a significant expansion in the building. Real estate market insiders say that JP Morgan has been working to consolidate some of First Republic Bank’s former employees into its 560 Mission office.

JP Morgan's new leases are just a fraction of the floorspace that First Republic Bank cancelled in 2024 when the latter was absorbed by JPM. Nevertheless, with the installation of billionaire businessman Daniel Lurie as its Mayor San Francisco feels like it has turned the corner. Restaurant and bar owners are optimistic.

Like Union Square used to be(Instagram)

“[The JPMorgan Healthcare Conference is] one of the best conventions of the year, and it affects us from the bottom up,” said John Konstin Jr., co-owner of John’s Grill at 63 Ellis St., which on Wednesday saw a crowd of conference badge-wearing patrons line up outside its doors ahead of its 11:45 a.m. opening. Konstin said that he brought former staff members back to work at the restaurant in preparation of the big week, which he expects will bring as many as 1,000 patrons to John’s Grill over the next three days.

“We are busy, lunch to dinner, nonstop during the conference,” he said, adding that the last six months of 2024 were “out of this world for us.”

“Business has been booming, and going into January with JPMorgan, I hope that continues,” he said...

“First and foremost, we have blue skies, that puts everyone in a good mood. But what I think is the important thing about today and this conference is what you see here (in Union Square): People sitting down and collaborating outside of the pressures that we normally deal with from our offices and behind our computers,” said Ali Tehrani, a partner at Amplitude VC, a venture firm in Canada. “This conference is really about breaking down silos, and what happens outside of the conference or in between sessions is critically important. You get to stress-test your ideas and concepts with another collaborator, versus doing it yourself.”

California's High Home Prices in the 1970's

California home prices achieved separation
from the rest of the U.S. in the 1970's (psmag)

One aspect of Jimmy Carter's Presidency of which I was unaware:

Carter’s presidency was No. 1 for California home-price gains

During Carter’s four years in the Oval Office, California home prices jumped 90%, as measured by the Federal Housing Finance Agency. No presidential term since Carter’s has produced a larger California home-price surge.

High housing prices are not unequivocally good; they benefit sellers but hurt buyers, and with sizable numbers on both sides politicians should try to cater to both (e.g., lower taxes on capital gains, faster permitting).

In California during Jimmy Carter's term, the State government was a huge beneficiary of the runup in home prices. Property taxes were ad valorem, i.e. based on the market value of homes, and had increased dramatically. There were numerous widely accepted anecdotes (though extrapolation would be unreliable because sellers did not have to disclose their motivation) of fixed-income seniors who were forced to sell their homes due to property tax increases. State legislators made no move either to lower taxes or rebate surpluses. The stage was set for Proposition 13.

From the State Board of Equalization's 2018 California Property Tax - An Overview:

On June 6, 1978, California voters overwhelmingly approved Proposition 13, a property tax limitation initiative. This amendment to California’s Constitution was the taxpayers’ collective response to dramatic increases in property taxes and a growing state revenue surplus of nearly $5 billion. Proposition 13 rolled back most local real property, or real estate, assessments to 1975 market value levels, limited the property tax rate to 1 percent plus the rate necessary to fund local voter-approved bonded indebtedness, and limited future property tax increases.

The home-price increases during the term of President Carter are an interesting phenomenon but are historically important because they spawned a nationwide taxpayer revolt that still echoes in the politics of today.

Property for the People

Federal land in Utah (Peery/AP/WSJ)

One of the first moves that a financially distressed company makes is to sell off unproductive assets to pay down its debt. Economist Thomas Sowell says that strategy should apply to the Federal government, which is not realizing revenue from its vast landholdings:

Some of that land—such as military bases—is used to house the government’s own operations. But the great majority of that land is not.

The rest of this government-owned land is so vast that there is little to compare it with—except whole countries. And not small countries like Belgium or Portugal. The amount of land owned by the National Park Service alone is larger than Italy. The land owned by the Fish and Wildlife Service is larger than Germany. The land owned by the Forest Service is larger than Britain and Spain combined. The land owned by the Bureau of Land Management is larger than Japan, North Korea, South Korea and the Philippines combined.

The idea of selling huge amounts of government-owned land is not new. Before the federal income tax was created in the early 20th century, land sales were sometimes a significant source of federal government income in the preceding two centuries. The prospect of large-scale land sales was considered during the Reagan administration, but the political opposition was too strong.

As of 2015, government-owned lands were valued at $1.8 trillion by the Commerce Department.

$1.8 trillion, even if adjusted higher from 2015 to current dollars, will hardly put a dent in the national debt of $36 trillion. However, it would be a mistake to limit the financial analysis of government assets to market values equivalent to undeveloped land.

Once these assets are sold, no longer will they be drains on the Treasury for their maintenance and security but contributing value to the economy as sites for residences and businesses. And with future positive contributions come future taxes.

After all, the entire United States west of the Mississippi was once as useless as Federal land is today. If Federal lands were to be used to their full potential, who knows what marvels may ensue?

A Regular Responsibility

The air filter on our Lennox furnace should be changed once a year, but I let it go for 17 months. The blackened filter, probably due to two summers of wildfires, showed that I should have adhered to the schedule.

Looking after our stuff (cars, appliances, landscaping, and heating, hot water, and security systems) has become problematic. Each item by itself is not burdensome, but together they add up.

Maybe downsizing or even renting is in our future. Let someone else shoulder these regular responsibilities.

Pod Living in SF's Future

$700 buys you the top or bottom

If I were single and in my 20's, starting a job in San Francisco, and didn't care about having a social life, I would definitely consider renting a sleeping pod:

Brownstone’s model is different in that it’s renting out pods that are much smaller in size than a traditional bedroom and more akin to Japan’s capsule hotels, which keeps prices lower. It’s also not trying to program social gatherings for residents, as previous startups have sought to do.

The reported rent of $700 per month is a fraction of the cost of a studio apartment. Even if one can afford to pay much more for housing, being a pod person may appeal to finance or engineering types who work long hours in the office and just need a place to crash and wash up. (This recalls the 2016 case of the Google engineer who claimed he was able to build his savings by $6,000 per month by living in a truck.)

Your humble blogger claims to have no expertise in San Francisco commercial real estate, but pod living appears to be one solution to 1) high housing costs and 2) a way to attract some young highly paid professionals back to the City and rejuvenate its night life.

Converting excess office buildings to pod housing is much less costly than conversion to standard apartments and condos. The only holdup seems to be, unsurprisingly, San Francisco's disorganized, inefficient regulatory agencies:

But last year, city officials ruled that the pods violated building codes because Brownstone hadn’t gotten approval for the residential conversion and the building was a safety hazard, in part because the front door required a key to open from the inside.

James Stallworth, CEO of Brownstone Shared Housing, said the city’s planning department was unresponsive for around nine months as the company sought to bring the project up to code. He said, ultimately, only a few minor changes were implemented: A stove was installed in the communal kitchen, permits were approved for a shower that was installed and the front door access was remedied.

Dan Sider, the planning department's chief of staff, said claims that the department was unresponsive were “utter nonsense” and said Stallworth only filed an application in July after “months of noncooperation.”

Thirteen residents were allowed to continue living in the building during that time, but Stallworth said the city told Brownstone to stop accepting new residents. It’s now advertising the pods for rent again.

Tampa: A Cloud in Florida's Horizon

(Image from Google Maps)

Tampa was one of the most popular relocation destinations in the country. However, repeated flood damage in the last five years has prompted a wave of selling as homeowners want to get out.

In the Tampa Bay metropolitan area, which includes St. Petersburg, a real-estate boom nearly doubled median home values from 2018 to June of this year, according to Redfin data. Young people flocked to the region, looking for a coastal lifestyle at a relatively affordable price.

The Tampa Bay metro area was the fifth most popular relocation destination in the country, according to an analysis by Redfin last year. The population has soared to more than three million.

Hurricane Helene deposited more than 6 feet of storm surge in the Shore
Acres neighborhood of St. Petersburg, Fla. (Photo: Mike Carlson/AP)

But as Shore Acres’s young residents sorted through the storm’s wreckage, only one thing was on their minds: selling.

Ballooning home insurance costs and the perennial threat of violent storms are starting to undermine housing markets throughout much of the state. But in few places has the turnaround been more dramatic than in low-lying communities up and down the coast of Florida that frequently flood.

The Tampa Bay housing market had been softening even before Helene struck. While prices have been flat, the area experienced a 58% increase in supply in August compared with a year ago, and a 10% decrease in demand, according to Parcl Labs, a real-estate data and analytics firm.

About half the homes listed for sale in Tampa experienced price reductions as of Sept. 9, the third highest share of all U.S. major metropolitan areas.

...The area’s affordability, once a large part of its appeal, is also waning as insurance premiums soar. Jacob McFadden was paying $880 a year to insure his home when he bought it in 2020. That amount has since almost quadrupled, to $3,300.

Premiums will likely increase again now. Property damage from last week’s Category 4 storm could be as high as $26 billion, according to estimates from Moody’s Analytics.

Florida is the No. 2 favored relocation destination for Californians.

So where did Californians move to in 2023?

Texas is the top destination for departing Californians, with 13.71% of California moving interest toward the Lone Star State.

Florida is #2 destination for Californians with 7.49% of interest. This confirms other reports that Californians are flocking to The Sunshine State.

Generally speaking, California homeowners who move to Florida have cashed out with substantial equity and should be able to invest in flood protection measures, such as raising their homes on columns, piles, and piers. They can also afford to pay for the higher insurance premiums. However, the exodus of lower-income, typically working-class homeowners from Tampa is a troubling sign that Florida may be peaking,

About Elon Musk: Another Reason You Should Read Beyond the Headlines

The 2.800 sq. ft. home was the property of Gene Wilder. Elon Musk sold it to Wilder's nephew.

Elon Musk forecloses on homeowner is a headline that seems to confirm the worst suspicions about a billionaire and his greed; that is, until one digs into the story and the homeowner sings his praises (!). [bold added]

In 2020, tech mogul Elon Musk agreed to sell one of his Los Angeles homes to filmmaker Jordan Walker-Pearlman and his wife, Elizabeth Hunter, for $7 million. Walker-Pearlman had grown up in the Bel-Air house—the longtime home of his uncle, the late “Willy Wonka & the Chocolate Factory” actor Gene Wilder—and Musk agreed to loan the couple most of the money they would need to buy it.

“He could have sold it for so much more,” Walker-Pearlman, a film director and writer, told The Wall Street Journal in 2022. “His sensitivity to me can’t be overstated.”

The facts, as noted in the article:

2013 - Elon Musk buys the late Gene Wilder's home for $6.75 million.

2020 - Musk lists the home for $9.5 million but sells it to Jordan Walker-Pearlman for $7 million and provides him with a $6.7 million loan, a much higher advance than any bank would allow.

2024 - The Musk loan managers file a notice of default after Walker-Pearlman fell behind the loan payments. Walker-Pearlman lists the home for $12.95 million ("Musk’s representatives have made it clear that they have no intention of forcing a sale").

Normally a foreclosure is bad news for the homeowner, but look at the overall picture. Jordan Walker-Pearlman and his wife, Elizabeth Hunter put $300,000 down, lived for four years in a house they never could have afforded were it not for a billionaire's generosity, then stand to receive $5.25 million ($12,950,000-6,700,000 mortgage-1,000,000 selling expense plug estimate) on the sale.

That's a $4.950,000 profit, 16.5 times their down payment, a 1,650% return on investment. On a yearly basis, that's 105% per annum over four years [$300,000 x (1+1.05)^4].

Elon Musk has given away multi-million-dollar profits to someone he probably never knew four years ago. Are billionaires greedy? Sometimes, but not always.

Note to Kamala Harris' speechwriters: that's how one does a "return on investment" calculation. It would be nice if you show your work, but I'm not holding my breath.

Needing a Lot of Gold to Live in the Golden State

Retirement here is excellent
if you have enough money.

Bankrate says that California is the fourth-worst state in which to retire:

The analysis ranked states based on five categories: affordability, overall well-being, the cost and quality of health care, weather and crime. Affordability accounted for the largest share of a state’s ranking at 40%, while crime was the smallest, at 5%.

With this methodology, California ranked 47 out of the 50 states, largely due to its high cost of living. The state ranked 50th on the affordability scale, which took several data points into account, including cost of living, state and local sales taxes, property taxes and average cost of homeowners insurance, according to Bankrate.

The major reason that California ranks 47th is that it is the least affordable State, and affordability determines 40% of the score.

If one has a paid-up house and an adequate nest egg, California would rank much higher. Living on the Peninsula, we have access to excellent medical care within 30 miles (Stanford, Sutter Health, UCSF), the weather is mild all year, and crime and homelessness are controlled much better than in San Francisco and San Jose. Unless conditions worsen dramatically, these retirees will be staying put.

California Not-so-Forever

Aerial rendering from California Forever (SFGate)

California Forever's plans to build a utopian city in Solano County have suffered a setback. The group pulled its November ballot measure: [bold added]

that measure, if passed, would have removed some zoning restrictions that prevent this type of development in the area.

California Forever will instead "submit an application for a General Plan & Zoning Amendment and proceed with the normal County process which includes preparation of a full Environmental Impact Report and the negotiation and execution of Development Agreement,” Solano County Board of Supervisors Chair Mitch Mashburn said in a statement Monday.

The news was celebrated by many in Solano County, where skepticism about the project ran deep. The group’s secretive purchases of huge tracts of land first brought about national security fears, even from local politicians, who had no idea who was behind the project. When the plan to build a futuristic city was announced, California Forever faced widespread pushback, ranging from concerns about billionaire backers like Reid Hoffman and Laurene Powell Jobs to questions about the impacts on traffic, water usage and proximity to Travis Air Force Base.

Almost every Californian involved in a construction project groans under the entanglement of red tape, and the billionaire investor group is no exception.

Reid Hoffman and Laurene Powell Jobs are ardent supporters of the Democratic Party--most recently they have pledged support to Kamala Harris' Presidential run--implying that they want to spread California's Progressive principles to the rest of the country.

However, when it comes to their business, they can't stand living under those strictures either.

A Good Idea, but They Didn't Ask Permission

(Chronicle photo)

Last week we wrote about how the Hillsborough "Flintstone" House will become open to the public for a short period as a high-end sushi restaurant.

Your humble blogger wondered why the snooty community would allow such commercial use, especially since the property's owner, Florence Fang, had a history of disputes with her neighbors about the use and appearance of the house. Now that shoe has dropped.

On Friday, the Hillsborough Police Department sent the owner of the Flintstone House, Florence Fang, a letter warning her that the sushi business could be in violation of the town’s zoning ordinance.

“Restaurants and other commercial uses are not permitted in a residential zone, even on a temporary basis,” wrote Linda Stevens, code enforcement officer for Hillsborough police. “You and the restaurateurs may not have been aware that this use would be illegal. Since you are now on notice about this restriction, please inform the operators that they may not open for business.”

In a statement, the owners of Stoneage Omakase said the business has been “incorrectly classified as a restaurant, which has led to this misunderstanding. We look forward to working with the city to resolve this issue.”

The business owners said that the food will be catered, not cooked on premises. In the meantime, reservations will be canceled and any deposits returned.

Hillsborough, the home of the descendants of Bing Crosby and William Randolph Hearst, doesn't sound like a fun, welcoming place, and I'm sure the town likes to encourage that impression.

Not the Caveman Diet

Bedrock architecture (Chronicle photos)

The last time we posted about the "Flintstone" house was five years ago.

In its latest iteration the Hillsborough home is a high-end sushi restaurant:

Stoneage Omakase will launch July 12 with a 15-course, $230 omakase menu inside a dimly lit, cave-like private dining room at the Bay Area landmark. A temporary pop-up run by a catering company, it’s the first time the Flintstone House, which sold in 2018 for $2.8 million, has been open to the public. (It was available to rent on Airbnb in 2016.)

The acclaimed chef behind the sushi is Masa Sasaki, who previously worked at the Michelin-star Maruya in San Francisco and his own restaurant Sasaki, both now closed. Sasaki was also slated to open a sushi bar as part of a splashy project at the Salesforce Transit Center rooftop before the plan fell apart. An Instagram video shows a menu with dishes like kurodai (black sea bream) nigiri and akami zuke (marinated tuna).

This is an inspired use of the property. Patrons get a Michelin-quality dinner along with a tour of the house.

I'd sign up, but Stoneage Omakase has stopped taking reservations. Here's wishing Chef Sasaki a successful, extended run.

A Thankless Task

(Image from Carby & Carby)

We have close friends and relatives who have been executors of estates (and we ourselves are co-executors of our parents'). The job goes smoothly if the estates are relatively small--say an owned home plus less than $1 million in liquid assets--, the heirs (typically siblings) get along, and the decedent leaves a will. In the absence of those conditions, the job is time-consuming and stressful. Many people turn it down.

In many cases, estate lawyers said, people named as executors don’t want the job, or decline it. “It happens all the time,” said Roy Kiecke, an estate lawyer in Austin, Texas. “Mom and Dad come in and don’t want to name one of the kids, so they appoint brother Bob, and he goes, ‘Huh?’ ” He recommends that people writing their wills ensure their named executors are up to the job—and revisit the choice every few years.

Naming a family member feels natural, but a grief-stricken relative might not be able to cope with the task. Picking one child can lead to resentment from siblings, while having co-executors can result in stalemates.

“If you’re hesitant, then that probably means that’s not the right person,” said Chasity Sharp Grice, an estate lawyer in Memphis, Tenn.

Especially in situations where conflict between heirs is likely, it is better to choose an impartial third party, such as a friend, lawyer or accountant, estate lawyers said.

One of our California friends has spent over a year handling his mother's estate on the East Coast. There are complications because one of his siblngs passed away years ago and his kids want the parent's share, but it wasn't specified in the will. Our friend will try to do something for them, but the surviving siblings have objected.

Yes, being an executor is an often thankless task where, despite best efforts, one will end up being the bad guy.