Perhaps you saw the recent headlines about property values being on the rise in Pasadena in the Pasadena Star News, and wondered what it meant for your prospects of buying or selling your home. If you're like me, newsstand headlines are an important source of Pasadena news. But what is the real story on the headline, "Property values on rise; Pasadena, San Gabriel show big increases"?
What the story reports is that the total value of the property in these cities has increased from the perspective of tax assessments. There are two reasons for this: first is the new building projects around Pasadena in the last year such as Archstone Pasadena at the Del Mar Metro station. When developers turn land into high-rise luxury apartments Los Angeles County significantly increases the assessed value of the property. The second reason the property in Pasadena has increased as a whole is that people are buying and selling homes, and the assessor revalues properties when they are sold. Proposition 13 limits the amount that property taxes can be increased on a homeowner, but when a home is sold the county reassesses the value of the property, which usually means a significantly higher property tax which reflects the market value of the house. It's something akin to rent control for property taxes.
So if these reassessments are higher after homes are sold in Pasadena, does this mean that home prices are rising? Unfortunately no. Some of homes on the market now haven't been sold for decades, so the old property taxes may have been based on market value from 1970. In other words, even if the value of the property has dropped 30% in the last year as they have in some cases (source: LA Land Blog), the new value of the property will still be far higher than the value from 1970.
Property values on homes in Pasadena have been depreciating, if anyone's still wondering. In the last 12 months the median price has dropped from around $775,000 to around $670,000 according to Altos Research, a 13% drop. The median price will continue to drop, but as I wrote in a previous blog post there are already homes at rock bottom prices now, just like there are amazing deals on individual stocks whether the stock market as a whole is up or down.
The main "takeaway" from this article (link to Star News) is that Los Angeles County and Pasadena in particular are not in danger of bankruptcy as some cities are. In Northern California, Vallejo filed for bankruptcy, largely because declining home values meant declining tax revenues and a budget deficit. Thanks to developers and homes being sold by sellers after decades of ownership, Pasadena will be okay.
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