# A Taxing Situation

By: Mark Wisterman

Here is an illustration of how the assessed valuation calculation works when you have been awarded a reduction in your assessment.

We are going to assume the following:

1. Joe Homeowner has just had the assessed valuation on his Lake Oroville home reduced from \$300,000 to \$225,000
2. For the sake of keeping this discussion as straightforward as possible, Mr. Homeowner will make no improvements to his Lake Oroville home.
3. Over the next 5 years  the value of his Lake Oroville home rises 10% per year

Under Prop 13 rules Mr. Homeowner’s assessed valuation, before the reduction can only increase a maximum of 2% per year. Without the reduction, under Prop 13, in the next tax year, Mr. Homeowner’s assessed valuation could be no more than \$306,000 (\$300,000 + the 2% increase of \$6,000).

While still enjoying the benefits of the reduced assessment, the  2% Prop 13 limitation does not apply. In the tax year following the reduction a reassessment is done to reflect the 10% valuation increase. The new assessment becomes \$247,500 (\$225,000 + 10%).

The following year the assessment will be increased to \$272,250 (\$247,500 + 10%)

Year 3 will be \$299,475 (\$272,250 + 10%)

Which now brings us to year 4. And here is the twist:

Notice that the year 3 value is still below the \$300,000 pre-reduced assessment. Does this mean that the county can increase the assessment another 10% to \$329,423 (\$299,475 +10%), or do they assess it at the \$300,000 from 3 years ago.

During the time that the reduced assessment is in place there is a running calculation kept of what the assessed valuation would have been WITHOUT a reduction ever taking place. This is called the Factored Base Year Value. The current assessment cannot exceed this Factored Base Year Value. In our case, the year 4 assessed value can be no more that \$324,730. Which is the equivalent to adding 2% per year to Mr. Homeowner’s \$300,000 original assessment.

If you are now thoroughly confused, I do not blame you. Here are a couple of websites for you to visit that have more detailed information. But, with values on the rise, it is important for you to know how it will affect you in this regard.

# Where Have I Heard THAT Before?

As part of my efforts to stay on the leading edge of real estate news, in order that I can keep all of you in the Lake Oroville housing market informed, I subscribe to a number on-line real estate new organizations who regularly communicate with me through e-mail with the latest and greatest real estate info.

In an artice that just arrived in today’s communication from Inman News, I thought I was experiencing Deja Vu all over again. In fact, some of it sounded so familiar that I started to rack my brain as to where I had heard this kind of thing before. I looked high and low and still no hint. I looked inside and outside. I looked everywhere in the entire Lake Oroville real estate market area. But no luck remembering where I had heard it before.

So now my dear readers, I turn to you for help. Here, excerpted in part, (Click Here to see entire article) is what I read from the article written by Glen Roberts, Jr., entitled ” A slow-motion real estate recovery”. Maybe you  can help me remember:

Mark Dotzour, chief economist for the Texas A&M Real Estate Center, said government stimuli have delayed recovery.

“We’re not in a ‘double dip’ in my mind,” said Dotzour — referring to some economists’ talk of a second dive into downturn after some signs of an economic rebound — “we just never hit bottom in the first place.”

The market essentially “fell off a cliff,” and the government’s “lifeline” of programs it throttled at the recession, among them the homebuyer tax credit programs, “Cash for Clunkers” auto program, loan mod programs and Federal Reserve’s purchase of Treasury debt, did not have the intended benefits.

The market “would have started coming back up to a year ago or so if we hadn’t had the federal intervention in the first place.”

The federal homebuyer tax credit programs appear to have been largely ineffective, essentially “stealing” sales forward that would have occurred at a later time. “We believe pretty strongly that we paid back every bit of that stimulus,” he said, with the slumping sales that followed expiration of the tax credits.

Hmm…..now where in the world have a I heard these type ideas before?????  Wait……………..yes…………………..now I’m starting to remember………….Here is what I had read in the past. Continue reading

# Don’t Touch That Wallet

### At least until July 1st, if you can. It is on this day that the sales tax rate in the State of California is reduced by 1 percentage point. In the Oroville, Paradise, and Chico areas this means that our sales tax goes from the current rate of 8.25% down to 7.25%.

The higher rate was imposed upon California by our legislature and Governor on April 1, 2009 in the hopes of helping close the budget gap caused by the out of control spending of our “state leaders.” As usual, raising taxes only made matters worse. But enough about politics.

With the expiration of the current increased tax rate only two weeks away (unless it is somehow extended) it is wise to consider putting of any non-essential purchase until the new rate takes effect. Consider the savings you will enjoy by putting off the purchase of that new car you are about to buy. By simply waiting a mere two weeks you can save yourself \$200 in sales tax for a \$20,000 car and \$300 in taxes for a car that costs you \$30,000. Heck, that is like getting a free tank of gas 🙂 Speaking of cars, you can also save on registration fees if you put your purchase off until July 1st because vehicle registration fees are also being rolled back then.

The reduction in the sales tax is going to be good for the economy of a state struggling to get back on its economic feet by leaving consumers with more money in their pockets that will most likely be spent on other things. For example, the overall price on a gallon of gas will be reduced by the reduction in the sales tax. At today’s price of \$3.77 per gallon at the corner AM/PM you will save almost 4cents per gallon with the new (or should I say old) rate.

If it is at all possible for you to put off that taxable purchase until July 1, then I say do it and keep more of YOUR money.

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# Weekly Oroville Sales

### Well, well. well, has it been a very long time since I posted Lake Oroville real estate stats, or what?

Don’t ask me why I haven’t done this for so long. Except for the fact that the market for Oroville home sales has not changed much since we last discussed this, I really have no reason, or even a lame excuse.

But, with Spring  just around the corner (I think), there is no better time than the present to start again. First you will notice that I am again posting monthly and yearly comparison stats in the right columns of this blog.  Here you can see how the sales of Oroville homes compare to Butte County as a whole. Remember the old saying that all “all real estate is local”. So ignore the national stats because they have nothing to do with our local markets.  Oh, one more thing…. MY intent is to also post these stats on my facebook business page at www.facebook/RealtyWorld.CA so if you haven’t been there please stop by and “LIKE” my page to be sure that you see my posts there.

 MLS Stats for Oroville Area Week Ending Week Ending Week Ending Weekly % 02/03/2011 02/10/2011 02/17/2011 Change # of Total Sales 4 10 6 -40.00% # REO/Short Sales Sold (SS) 3 8 3 -62.50% % Sales that are REO/SS 75.00% 80.00% 50.00% -37.50% Avg. List Price \$114,050 \$105,467 \$120,812 14.55% Avg. Sold Price \$108,255 \$102,760 \$120,133 16.91% Sold Price % of Listing Price 94.92% 97.43% 99.44% 2.06% Avg. Days On The Market 74 73 56 -23.29% Total Sales Volume \$432,900 \$1,027,600 \$720,800 -29.86% # of Single Family Listings 227 230 235 2.17% # Foreclosed On Market 47 47 48 2.13% % of Foreclosed on Market 20.70% 20.43% 20.43% -0.05% # Short Sales on Market 18 18 19 5.56% % Short Sales on Market 7.93% 7.83% 8.09% 3.31%

# Weekly Sales Update

#### Neither rain, nor sleet, nor snow, nor Arizona trip, will keep me from providing you, my loyal Lake Oroville real estate market readers, with the weekly sales activity number for last week.

You heard right, I am actually taking a few days of southwest r& r. But fear not, I have not forgotten my duty to you.

I hope you all had a great and blessed Christmas day and that you are planning for a safe New Years celebration.

Sales numbers for the week were actually pretty good considering that it was a major holiday week.  I have highlighted what I believe to be the stats of the week. Average sold price has been climbing the past 4 weeks and last week was the highest it has been in the past 10 weeks. The other stat of note is, once again, the number of single family Oroville homes for sale. The is number represents the fewest number of homes on the market since I have been bringing you this particular statistic beginning June 8, 2009.

As a seller, or potential seller, this is THE number to watch going forward. Smaller inventory will eventually translate into higher prices.

Well, that is all for know. I’ve got another “busy” day scheduled tomorrow as I do more trailblazing through the Arizona  desert on my quad runner.

 MLS Stats for Oroville Area Week Ending Week Ending Week Ending Week Ending Weekly % 12/7/2009 12/14/2009 12/21/2009 12/27/2009 Change # of Total Sales 8 9 13 11 -15.38% # REO/Short Sales Sold (SS) 4 6 5 6 20.00% % Sales that are REO/SS 50.00% 66.67% 38.46% 54.55% 41.82% Avg. List Price \$96,775 \$93,865 \$112,500 \$127,354 13.20% Avg. Sold Price \$82,500 \$91,783 \$105,358 \$131,627 24.93% Sold Price % of Listing Price 85.25% 97.78% 93.65% 103.36% 10.36% Avg. Days On The Market 108 45 157 103 -34.39% Total Sales Volume \$660,000 \$826,050 \$1,440,750 \$1,447,900 0.50% # of Single Family Listings 336 327 331 323 -2.42% # Foreclosed On Market 35 35 38 39 2.63% % of Foreclosed on Market 10.42% 10.70% 11.48% 12.07% 5.17% # Short Sales on Market 45 44 44 44 0.00% % Short Sales on Market 13.39% 13.46% 13.29% 13.62% 2.48%