When the Market Recovers

Restoring Prop 13 Values When the Market Recovers

Between 2007 and 2012 as real estateprices fell during a statewide economic recession, Assessor staff temporarily reducedvalues on over 12,000 properties as permitted by law.  By January 1, 2018 almost 10,000 of thoseproperties had either been sold or restored to its Proposition 13 factored baseyear value.  There is no limit as to howrapidly the Assessor can reduce values temporarily below the factored base yearvalue to track market conditions.  Whilethere is also no limit as to how rapidly the Assessor can restore values in arecovering market, our policy has been to phase in the restoration over severalyears.

When fully restored, the assessed valuecannot exceed the Proposition 13 factored base year value unless there has beena change of ownership or new construction during the temporary decline in value.  Under Proposition 13 the base yearvalue established at the time of transfer of a property must be increased by aninflation factor not to exceed 2% per year. This adjusted value is known as the factored base year value and remainsas the ceiling beyond which values cannot be increased.

The housing bubblethat began in 2005  started returning toa more normal real estate market beginning in 2012.   We have been restoring value for many, butnot all, of the 12,000 properties in a decline in value status beginning withthe 2015-2016 assessment year.   Noticesof any adjustment will be posted on the county website by July 15 of each year.You will be able to see the notice by putting in your parcel number or street address on our parcel data page.

To illustrate the reduction and restoration process let’s look at a hypothetical example.  In August 2006 at the height of the market Sam and Dorothy purchased a home for $800,000.  $800,000 became their Proposition 13 base year value.   The real estate market suffered a severe and steep decline between 2006 and 2012 so that as of January 1, 2008 their home was only worth $725,000 which we enrolled as a temporary decline-in-value.  By January 1, 2012 their value had continued to decline to $575,000.   As of January 1, 2013, the real estate market had begun to recover so their value was adjusted upward to $625,000.  For the 2014-2015 assessment year their value had increased again by 25% to $781,250.  
 Their January 1, 2014 Proposition 13 factored base year value had increased to $874,386 still above their temporary decline in value of $781,250.  For each succeeding year we will continue to make gradual upward adjustments to the temporary decline in value as market conditions improve.    Assuming the market has fully recovered by January 1, 2016, the current market value of their home hypothetically could be $950,000.  By January 1, 2016, the factored base year value of their home will be to $923,672.  For 2016 we will enroll Sam and Dorothy’s factored base year value of $923,672 which is once again below the current market value of $950,000.  

Should you have any questions please contact Napa County Assessor-Recorder-County Clerk John Tuteur at 707.253.4459 or by e-mail [email protected]   More articles can be found at https://www.countyofnapa.org/149/Assessor