South County homeowners, many of them first-time buyers, are
losing millions of dollars in equity even as the total value of
property in Santa Clara County
– and the cities of Gilroy and Morgan Hill – rises.
Morgan Hill – South County homeowners, many of them first-time buyers, are losing millions of dollars in equity even as the total value of property in Santa Clara County – and the cities of Gilroy and Morgan Hill – rises.
The assessed value of all real and personal business property in the Santa Clara County rose 8.25 percent this year, to a record $283.51 billion, county Assessor Larry Stone announced this week.
The overall rising value signals an improvement in the economy, Stone said, with commercial and industrial properties soaring in value as high-tech giants such as Google, Adobe, Yahoo!, E-Bay and Apple expand their business.
But the county’s assessment also points to a sharply divided housing market that’s chillier in mid-range markets than high-end neighborhoods.
As homes in Los Altos, Los Altos Hills and Palo Alto retain their lofty values, mid-range markets in other parts of the county – especially San Jose – continue to soften.
As a result, nearly 18,000 property owners – three times more than last year – are paying lower property taxes and getting a tax break because the value of their land decreased, dropping by a combined $4.9 billion.
In California, Proposition 13 limits property taxes to 1 percent of a home’s value. The value is based on the original purchase price, plus a 2 percent annual increase for inflation.
When the market causes a home’s value to dip below the original purchase price, Proposition 8, passed in 1978, allows for rollbacks.
In Gilroy, 698 properties lost a combined $42.9 million in value.
In Morgan Hill, 161 properties lost more than $9.1 million in value.
Last year, 146 Gilroy properties lost $28.5 million in value and 38 Morgan Hill properties lost $3.6 million.
Lending practices that allowed thousands of Silicon Valley residents to buy homes with little or no money down drove prices up after the dot-com crash in 2001. Now the housing market is slumping and many of those buyers have no equity as their payments go up.
Meanwhile, Gilroy’s overall assessed property values – including real and personal business property – rose by 10.8 percent, to $6.3 million.
Morgan Hill’s rose by11.8 percent, to $3.6 million. Additionally, the total value of properties in the Morgan Hill Redevelopment Agency’s target area rose 9.9 percent, to $2.85 million.
That could mean more revenues for local coffers, though it’s still too early to tell what the implications will be, Morgan Hill and Gilroy officials said.
“Both cities have had a good amount of residential and commercial growth, so it’s not surprising that property values have increased,” said Gilroy City Administrator Jay Baska, adding Gilroy is projected to collect $8.9 million in property-tax revenue this year, a 7.16 percent increase from last year’s $8.3 million.
While it will take time for cities to do the calculations to know how much of the county’s property tax pie they will get, Morgan Hill Finance Director Jack Dilles said the impact will likely be substantial.
Generally speaking, roughly 10 percent of property tax dollars are routed back to city coffers.
The county’s assessment recognizes the combined value of all residential and commercial/industrial property in the county – more than 450,000 parcels – as of Jan. 1.
