A bright side to the sky-high prices of Southern California real estate emerged this week when the Los Angeles County Office of the Assessor announced record-breaking property tax receipts.
The 2022 assessment roll, the value of inventory of all taxable property in the county, grew by a record $122 billion, 6.95% over the prior year to an eye popping $1.89 trillion in total net value, according to a news release from L.A. County Assessor Jeff Prang.
That translates to nearly $19 billion in property tax dollars for vital public services such as education, infrastructure, first responders, and healthcare workers as well as other services.
“I am pleased to report the 6.95% increase in assessed property values in Los Angeles County shows we are slowly emerging from the pandemic that has been with us for the past two years,” Prang said. “Although the housing market is showing signs of leveling off now, it had been robust with low interest rates, inflation and a high demand during the COVID restrictions.”
The assessment roll is based on the value of property on January 1, 2022, and is driven by real property sales, both residential and commercial, which added $69.6 billion during the previous year. The roll also includes the consumer price index reassessment for properties that did not change hands, which reached its full potential of 2%, adding another $34.2 billion to the roll.
The assessment roll comprises 2,589,521 million real estate parcels and business assessments, including roughly 1,889,000 single-family homes, 250,000 apartment complexes, 248,000 commercial and industrial properties and more than 165,000 business property assessments.
“As I said when I released the May forecast, the growth in the single-family residential market was set to produce a record-breaking increase in transfer assessments and it did, adding $69.6 billion,” Prang said. “However, lingering economic distress, the continued concerns of COVID-19 variants and evolving business trends have resulted in numerous challenges for the county. As always, however, we pulled together and have produced a thorough, accurate, and fair roll in a timely manner.”
That same robust growth in tax receipts likely won’t continue, as experts predict the local, and national, real estate market is beginning to slow down. According to real estate data clearinghouse CoreLogic, year-over-year home price gains nationwide topped 20% in May, the latest month for which it has data. However, projected growth to May of 2023 is just 5.6%, with some super hot markets, including Bremerton, Washington and Boise, Idaho expected to decline.
The market’s predicted slowdown is being blamed on the ever-increasing cost to purchase a home, particularly for first-time buyers, who have seen projected monthly payments increase sharply as mortgage rates have risen sharply since January.
As of Wednesday, the average 30-year fixed rate loan is 5.32% in California, up from 3.45% in January, according to real estate firm Zillow. This data reflects a conventional loan with a 20% down payment and a credit score better than 740.
“Slowing home price growth reflects the dampening consequence of higher mortgage rates on housing demand, which was the intention,” Selma Hepp, deputy chief economist at CoreLogic said, referring to recent interest rate hikes from the Federal Reserve intended to curb inflation.
“With monthly mortgage expenses up about 50% from only a few months ago, fewer buyers are now competing for continually limited inventory,” Hepp said
According to CoreLogic, the greater Los Angeles area was up 17% in May over the same month in 2021, with a projected growth of 5.4% through next year. Though U.S. home price growth relaxed slightly in May from April, it remained in double digits year over year for the 16th consecutive month. As in past months, all states and Washington, D.C. posted annual appreciation, with 13 states posting gains of more than 20%.
The median sold price for a home in Claremont was $930,000 for the second quarter of 2022, a 17% increase year-over-year, according to Wheeler Steffen Sotheby’s International Realty. While inventory is up, with approximately 55 current listings, the time a home is on the market dropped 42% to just 11 days.