{"id":197814,"date":"2008-01-09T20:57:00","date_gmt":"2008-01-10T01:57:00","guid":{"rendered":"https:\/\/www.panix.com\/~msaroff\/40years\/2008\/01\/09\/the-effect-of-proposition-13-on-the-california-real-estate-market\/"},"modified":"2008-01-09T20:57:00","modified_gmt":"2008-01-10T01:57:00","slug":"the-effect-of-proposition-13-on-the-california-real-estate-market","status":"publish","type":"post","link":"https:\/\/www.panix.com\/~msaroff\/40years\/2008\/01\/09\/the-effect-of-proposition-13-on-the-california-real-estate-market\/","title":{"rendered":"The Effect of Proposition 13 On the California Real Estate Market"},"content":{"rendered":"

A friend of mine pulled a graph from an old story in the Orange County register where they predicted that home prices were expected to fall in 2007<\/a>. (Well I did say it was an old story, dated 19 October 2006.<\/p>\n

What I found interesting was the graphic, what we can learn from it with a bit more data:

Ignoring the obvious, that they underestimated the drop like every other real estate ad supported media entity<\/span>, we can learn something about the effect of Proposition 13<\/a> on the California real estate market.<\/p>\n

Proposition 13, passed in 1987, says that a house can only be taxed at 1% of property evaluation, and that absent a sale, that the evaluation can not increase by more than 2% per year.<\/p>\n

So that $62,290.00 house in 1977 would now be assessed, absent any intervening sale, at $112,830.00 in 2007, while the true market value would $550,000.00 in 2007.<\/p>\n

Truth be told, it would probably be less, if just because houses are getting bigger (McMansions), so let’s call it $508,000.00.<\/p>\n

So if you stay in the house, and improve it, and don’t down size it, and leave it to your kids, right now<\/span> you will be paying 22% the taxes you would if it has been assessed at fair market value.<\/p>\n

Under those circumstances, it makes no sense to move to a bigger house when your family gets bigger, you just add on to the existing one, and if you sell to move to a smaller house when the children move out, your profit are wiped out by the tax hike.<\/p>\n

There are a whole bunch of people sitting on houses that they would otherwise sell, because of the tax consequences.<\/p>\n

So less housing reaches the market, you see less of the empty nesters moving into townhouses, etc., more sprawl, and through supply and demand, prices rise.<\/p>\n

You also have the side effect that commerical property is corporate owned, and the corporation is sold, rather than the property, which raises the burden on new home purchasers.<\/p>\n

It’s one of the reasons that California is so screwed up.
<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

A friend of mine pulled a graph from an old story in the Orange County register where they predicted that home prices were expected to fall in 2007. (Well I did say it was an old story, dated 19 October 2006. What I found interesting was the graphic, what we can learn from it with …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1088,985,983],"tags":[],"class_list":["post-197814","post","type-post","status-publish","format-standard","hentry","category-real-estate","category-regulation","category-taxes"],"_links":{"self":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/197814"}],"collection":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/comments?post=197814"}],"version-history":[{"count":0,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/197814\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/media?parent=197814"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/categories?post=197814"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/tags?post=197814"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}