Sunday, October 27, 2024

PROP. 13 GETTING BLAMED FOR SLOWING STATE’S HOME SALES

 

CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, NOVEMBER 12, 2024, OR THEREAFTER

BY THOMAS D. ELIAS
“PROP. 13 GETTING BLAMED FOR SLOWING STATE’S HOME SALES”

 

The election is well under way, even if results are not yet in. Meanwhile, the always controversial Proposition 13 is far from finished with absorbing criticism.

 

The landmark 1978 property tax-cutting initiative took plenty of heat and also saw multitudes rise to its defense this fall as voters considered Proposition 5, aiming to reduce the vote needed to pass most local bond issues from the current two-thirds to just 55 percent. Prop. 13 had already been altered early in this century to allow school construction bonds to pass on 55 percent margins.

 

That has raised property taxes considerably wherever such local bond issues passed.

 

Meanwhile, Prop. 13 continues to stand for tax stability. This very attribute now creates new gripes about the measure, also known as the Jarvis-Gann Initiative, for two longtime anti-tax gadflies of the 1970s, Howard Jarvis and Paul Gann.

 

Among real estate brokers, Prop. 13 gets much of the blame these days for the low volume of existing homes now up for sale and their relatively slow movement – spending an average of about a month on the market even when sales stock is minimal.

 

The reason Prop. 13 takes heat over this is simple: it stabilizes property taxes. This in turn can cause longtime owners to hang onto their residences much longer than they otherwise might.

 

From the time it passed, Prop. 13 has held property taxes at one percent of the latest purchase price, plus annual increases limited to just 2 percent of the last previous tax bill. Homeowners who bought before June 1975 were awarded tax limits of one percent of their 1975 assessed value, with the same 2 percent limit on annual increases.

 

That sees many owners of homes now valued at $1 million or more paying annual levies of $2,000 or less, while new buyers of virtually identical properties pay at least $10,000. It’s an inequity that no politician in the last 46 years has seriously challenged. And it’s a major incentive for longtime homeowners to stay put.

 

Also affected is today’s market, according to realtors all around California. Sales stock of existing homes is slim in Los Angeles, County, the San Francisco Bay Area, Orange County and San Diego, the four largest and most expensive major market areas in this state. It’s also true that non-cash-only buyers must be equipped both to cope with monthly payments that often top $20,000, plus that big new tax bill.

 

With sales stock down, potential buyers now outnumber sellers in all those areas by a fair margin, realtors report.  How low is the stock? In the San Francisco market, covering the entire Bay Area, fewer than 20 homes out of every thousand have changed hands this year.

 

In Los Angeles County, it’s just 15 of every 1,000. Both are major drops from the pre-pandemic year 2019, when for-sale housing stock was more than 30 percent higher.

 

Similar figures are reported for both San Diego and its North County suburbs, while no current figures were obtainable for current stocks in Central Valley cities like Fresno and Bakersfield. Those areas, though, have seen sales price increases of about 10 percent over last year, but new property tax bills there don’t skyrocket the way they do in the higher-priced markets. That's because the average price in Fresno stands at about $338,000, which produces a tax bill of almost $3,500 in the first year of occupancy, far less than in higher-priced areas.

 

Sales stock of attached homes, including condominiums and townhouses, is significantly higher than among detached single family houses, standing at about 19 per 1,000 units in San Francisco and slightly less in the other big markets.

 

It all translates to a seller’s market, with an asterisk for Prop. 13’s limits, which cut down what’s available but stabilize the tax bill any new homeowner will pay now and in future years.

 

Anyone wanting to change this will have to deal with the powerful lobby that has made the essence of  Prop. 13 politically untouchable.


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Email Thomas Elias at tdelias@aol.com. His book, "The Burzynski Breakthrough, The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It" is now available in a soft cover fourth edition. For more Elias columns, visit www.californiafocus.net

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