Economic Recovery Triggers Steep Increases in Assessed Values for Over 128,000 Homeowners

Last year, residential properties owned by 136,000 property owners were assessed below their purchase price to reflect the collapse of the residential real estate market during the “Great Recession.”  This year, the market value of 47,000 of those properties has risen to the point that all the value lost during the recession has been fully restored, and the market value now exceeds the original purchase price.  In addition, the assessed value of another 81,000 properties will be partially restored to reflect the surging residential property market.  “Just as my office reduced assessed values to respond to the declining market, the same state law also requires the assessor to restore assessed values when the market recovers,” said Assessor Larry Stone.

[contextly_sidebar id=”e0b099e77e1b32fea9d35b91b35862fe”]For the remaining three-quarters of all property owners, the limits imposed by Proposition 13 apply, and the assessed value will increase by two percent.  When the market value of a property declines below the previously established assessed value measured as of January 1 each year (lien date), the assessor is required to proactively reduce the assessed value to reflect the lower market value.  However, as the real estate market rebounds, the assessor is required to “restore” the assessed values for properties previously reduced during the downturn.

Proposition 8, passed by California voters in November 1978, provides that property owners are entitled to the lower of the fair market value of their property (as of January 1, 2013), or the base year value as determined at the time of purchase or construction, and increased in accordance with Proposition 13 by no more than two percent annually.

“If a property assessment was reduced during the recession, the restoration of its assessed value is not limited to two percent, until the market value reaches a property’s purchase price plus the annual inflation increase of no more than two percent.  The market solely determines whether the assessed value of a property is reduced or restored,” Stone said.

“The increases in assessed value are clear evidence that Silicon Valley is roaring out of the economic abyss created by the recession.  Unemployment has dropped to seven percent, faster than the nation or the state.  The NASDAQ is soaring.  Apartment rents have reached record levels with single family homes close behind.  It was inevitable that property taxes would follow.”

“While increases in property taxes are never welcome, this is actually very good news for our local economy, especially for homeowners.  It means the value of most families’ single most valuable asset, their home, is once again regaining solid equity lost in the collapse of the residential housing market.

“What has surprised me is the speed and steepness of the recovery in the residential market.  In some areas we are seeing significant increases in the market values of homes and condominiums.  For example, in the Alum Rock Elementary School District, 889 condominium properties experienced an average increase in market value of $55,000—a 29-percent increase over the prior year.  Yet, many of these properties still remain far below their purchase price,” Stone said.

To help prepare nearly one-quarter of all homeowners in Santa Clara County for an increase in their property taxes, the assessor took the unprecedented step of identifying and reporting the geographic areas that can expect to receive the largest increases in assessed values.  “It is important to provide homeowners with as much early information as possible,” said Stone.

During the last weekend of June all property owners will receive their annual notification letter informing them of their 2013 assessed value, which is the basis for their property tax bill mailed in October.  “Santa Clara County is one of only ten counties in California to provide this early notice.  Most property owners in California learn of their assessed value for the first time when they receive their tax bill,” said Stone.

On June 28, the assessor will mail over 478,000 assessment notices to every property owner in Santa Clara County.  In addition to the assessed value, the notice also details the process for requesting an informal review of their assessment.  The Assessor’s Office will complete as many informal reviews as possible prior to August 1, the deadline for making changes that will be reflected on the property tax bill mailed in October.   Additionally, the letter describes the process for filing a formal assessment appeal by the September 16, 2013 deadline.

The assessor also has an “on-line tool,” available 24/7, that enables property owners to understand which comparable sales were used to support their assessment.  “This is part of our continuing commitment to provide a high level of customer service, plus it dramatically reduces the number of phone calls and inquiries.  Understanding how we determined assessed values, for most homeowners, no longer requires calling—or worse, driving—to our office during business hours,” said Stone.  To access the data, a property owner will use the user name and password they created last year or the PIN provided in the notification.

“If you are one of thousands of property owners who not only logged in last year to review your appraisal, but also signed up for our new ’Email Opt-In,’ you will receive the added benefit of an early electronic notice.  This is especially important if a property owner wishes to request an informal review of their assessed value, as we administer this workload on a first-in, first-served basis,” said Stone.

Early notice is one of many benefits of joining the “Email Opt-In” service.  An interactive service modeled after the private sector’s on-line banking, the “Opt-In” tool enables taxpayers to securely opt-in to receive assessment notices and to interact with the Assessor’s Office electronically, rather than by mail or telephone.  In the near future, additional services will be available to taxpayers who opt-in that would otherwise require an ink signature.  In addition, individual property characteristics will soon be available electronically.

West Coast Commercial Real Estate News