PROP. 13 PROTECTS AGAINST THE YO-YO EFFECT
Even for those who aren’t in the market, it’s hard to ignore all the news about rising home prices. According to the California Association of Realtors, median home prices are up nearly 30 percent over just the last year. California has not seen this big of a one year increase since 1977 when it jumped 28.1 percent.
But the huge increase in values in 1977 brought as much anger and fear as anything else because that was just before voters overwhelmingly approved Proposition 13 to rein in out of control property taxes. Those taxes were going up as fast as home prices and forcing many from their homes.
Under the pre-Proposition 13 system, homeowners shuddered in fear when their tax bill arrived because it would be based on what someone else was willing to pay for a home like theirs, not on what they had paid or could afford. Those whose property values were increased by hyperinflation in the housing market were treated as if they were now “rich guys” who should be taxed on their “paper profits.” But those who were committed to homeownership were seeing no benefit. If they… Read More