The cost of single-family homes in the topsy-turvy Silicon Valley housing market jumped $50,000 in one month, but this year, at least 15,000 home owners will enjoy lower property taxes because of falling home values in some districts.
Silicon Valley's median price of single-family homes roared to $790,000 in February, up from $740,000 a month early and $765,000 a year earlier.
The surprising jump comes on the heels of January's median of $740,000, which was the same a year earlier, in January 2006. The flat January-to-January price also reflected what had been a downward trend in home prices since early last summer, according to San Jose-based Creekside Realty broker Richard Calhoun's Bay Area Real Estate Market Newsletter.
However, February's high jump in prices does appear to put a positive spin on the market.
"I'm seeing a lot more buyers who are active. They are coming to realize maybe prices aren't going down," said Warren Winsness, president of the Santa Clara County Association of Realtors.
Winsness, also broker owner of Winsness Realty in Los Gatos, said there is more open house activity than in recent months and sellers are taking time to prepare their homes for market to make them more visually attractive to potential buyers.
"Employment is better, people are getting realistic. They want to move," he added.
The high price of housing had restricted movement.
Home prices in Silicon Valley peaked at $819,950 in June of 2006, but by January this year prices had fallen nearly 10 percent to $740,000. February's market cut deeply into those losses, putting back $50,000 in the median price of single-family homes, but it may be too early to celebrate.
Calhoun says the month-to-month price jump likely doesn't signal the flat and falling prices trend is changing.
"You have to be careful. The data is monthly and when you look at it on a weekly basis, that $50,000 occurred all in the last three days of February when a lot of high-end home values closed. There was a disproportionate increase in high-end closings," said Calhoun.
Indeed, a substantial number of individual cities and smaller communities reveal January-to-February 2007 or year-to-year price declines, or both.
"There's a huge geographical diversity in how fast properties are selling. The expensive geographic areas are making up a large percentage of sales and they are selling with multiple offers. Other areas are having price depreciations. It shows you the market is not in equilibrium," Calhoun added.
The market is also out a whack by type of housing. Instead of rising, the median price of condos took a hit, moving from $515,000 a year ago in February down to $505,000 this year. In January this year, the median condo price was $518,880.
While the Santa Clara County Assessor does not yet have geographic or property-type specifics on the homes it will reassess, nor an exact specific number, the move to lower assessed values is a sign of the times.
Silicon Valley's housing market frenzy during the first half of the decade caused many buyers to bid up the price of properties, often artificially inflating values. Buyers, particularly those who purchased homes at the height of the boom and must now sell, are finding they have to price their home to sell. That means lowering the price. Buyers who purchased homes during the peak of the market are those most likely to have assessed values eligible for reduction.
In 2006, there were 5,246 Silicon Valley homes on the rolls with reduced assessed values, up from 2,962 in 2005, according to the Santa Clara County Assessor's Office.
The exact number of homes with reduced assessed values for 2007 won't be known until the assessor completes the tally in May.
However, thanks to the use of computer models to keep annual tabs on the assessed value of homes, the office anticipates rolling back assessed values on two to three times as many homes as were already on the reduced assessed value rolls in 2006.
In Silicon Valley, a home owner's annual property tax bill is about 1.2 percent of the assessed value of the home. There are some exceptions, but typically, that value is attached to the selling price, or fair market value, when a property is recorded as sold or transferred.
California's Proposition 13, in part, guides procedures to assess values and restricts to 2 percent a year the amount the assessor can increase the assessment level on properties that have not transferred or on properties that have not completed new construction, say, as in a remodeling job.
Another rule, Proposition 8, allows for temporary reductions in assessed values when market values fall below Proposition 13 assessed values.
Last year, the cities with the greatest number of properties (largely homes, but also some commercial buildings) with Proposition 8 reduced assessed values were Sunnyvale (1,134), San Jose (964), Santa Clara (813), Cupertino (586) and Mountain View (548).
Home owners with properties granted an assessed value reduction this year, as always, will be notified of a Proposition 8 value reduction on their assessment notice, which is mailed out to home owners in mid-May. Many California counties use computer modeling, but Santa Clara County was the first and is one of only eight counties that provide home owners with the extra notification of lowered assessed values.
Property owners who don't receive a reduction in assessed value, but believe their home's assessed value is too high, can request a review, after they receive their notification in mid-May. Home owners should seek a review no later than June 15.
Typically that means presenting to the assessor's office supporting evidence that a reduction is due, perhaps three or more recent comparable (by age, square footage, floor plan, location, etc.) home sales in the property's neighborhood. An appraisal can't hurt.
If a reduction is in order, the assessor's office will make the change before the annual assessment roll is closed July 1.
Home owners who don't agree with the findings in the review, have from July 2 to September 15 to formally appeal the review to the county's assessment appeals board, which is independent of the assessor's office.
Basic information about the review and appeals process is provided on assessment notices. Property tax law, assessed values of homes, filing forms and detailed instructions for filing reviews and appeals in Santa Clara County, along with a host of related information, are all available on the county assessor's website.
Chances are a review or appeal may not be necessary.
The assessor's office adjusts values in advance by using computer models to measure market conditions by high school district. Conditions include when the home was purchased, how long the current owner has been in the home, location and other factors.
"The assessor is not a revenue agent for local government. We try to do our very best to put the right value on properties before the assessment roll closes," said Lawrence E. Stone, county assessor.
Computer modeling is used on virtually all assessed values, even those that aren't reduced. In some cases, when the properties don't fit the general profile of homes in the computer model, the assessor's office appraises properties individually.
The proactive approach to assessing value helps keep the share of over assessed property values well below the national level. Some 60 percent of properties are over valued on a national level, according to the National Taxpayers Union (NTU).
Stone said, thanks to computer modeling, less than 5 percent of appeals actually end up in a hearing. Half the appeals filed are withdrawn before a hearing and 45 percent get a minor reduction in assessed value before they go into a hearing.
"We retain about 95 percent of the value of the original assessed value disputed" said Stone.
In any event, any reduction in value is temporary, until the market and home values recover.
Ah, but here's the rub.
Once a property's value returns to pre-reduction levels, Proposition 8 allows the assessor to put a home's assessed value on the fast track back to its pre-reduction level, even if that increase in value represents more than the Proposition 13 allowed 2 percent annual increase.
"We are required to review all properties in temporary decline. At the height of the last major downturn in home prices, in the mid-1990s, our office reduced the values of nearly 100,000 properties. When the market returned we increased the values to their Proposition 13-protected assessed values," said Stone.