There is a silver lining for people with declining home values, coming in the form of lower property taxes. County assessors for five counties in the Los Angeles area are currently in the process of cutting property taxes on half a million or more homes due to the recent declines in home valuations, with notices going out as soon as this month.
In Los Angeles County, the average annual property tax reduction is expected to be approximately $750, with Riverside County expected to be even more at $1,200.
The tax breaks will be targeted to homes purchased around the market's peak of 2005 and 2006. As an example, the Assessor's Office Los Angeles County will only review taxable values on homes purchased after January 1st 2004. Of the 318,000 homes examined 40.25% will have their taxes lowered. In Riverside, San Bernardino, Orange and Ventura counties the assessor's office is expected to reduce taxes on 2/3rd's of the homes examined.
The taxable value of a home is set when the home changes hands and is dependent upon the sale price, and this value is only allowed to rise 2% per year after the sale. Taxable values of homes bought before 2004 as a whole increased significantly more than 2% annually in the first half of the decade, even when taking the current slump into consideration.
Property tax reductions in lieu of declining home values were voted into law by way of proposition 8 in November of 1978. If homeowners that purchased before 2004 wish to have their property taxes reduced, an assessment review application, which is often unofficially called a "Proposition 8", or "Decline-in-Value" form must be completed and returned to the county assessor's office. These documents are available by phone request or the assessor's website, and this process can be easily accomplished for free.
The good news for most homeowners meeting these requirements is that property tax relief is a positive effect of declining home values. There is even an appeals process for assessment claims that are initially rejected. As long as certain requirements are met, appeals could have up to a 25% chance of being reconsidered in some areas, so it never hurts to try.