Prop 19 in California may pass, and it could have ramifications on the housing market that’s already hard to predict.
What is in the Proposal?
It’s important to understand the proposal to see how it might affect California’s housing market. The biggest selling point of the proposal involves seniors.
In California, homeowners lock in the tax rate at the time of purchase. This is especially good for seniors, but the issue Prop 19 addresses is that seniors can’t keep that rate if they decide to purchase a new home.
If the proposition passes, seniors will be able to buy a new house and transfer the old low rate, as long as the property has a similar value. That means local real estate finance specialists like Marc Lantzman of Lantzman Lending will have a lot of work cut out for them as seniors will be looking to move for the first time in decades.
The other important part of this proposition deals with inherited property. At the moment, folks who own a home for a long time and have a low tax rate can pass this property down to their heirs. The heirs can do whatever they want with the property, either live in it or rent it out, and they get to keep that low tax rate.
The proposition strips that away from heirs and allows them to keep the tax break only if they live in the property, not if they rent it out.
How Will These Changes Affect the Housing Market?
One big change involves seniors who might feel the desire to buy a new home. Since this measure lets them move their tax rate to a new house, some folks might take advantage of that. Seniors shouldn’t have to stay in the same house their whole life. It might be time for something new. Seniors may also want to downsize as they get older. Children move and they are left with more room than they need.
There’s no doubt this piece of information is going to sound like music to real estate agents in California. Younger folks are taking longer to purchase a home, which does put some real estate agents in a bind. Seniors are likely ready to purchase if they’re given a chance.
There’s another side of this story, which is the mobility of homes. The proposal might free up more property as well. Heirs who don’t want to live in their inherited property won’t benefit from that tax break. This is not good for them, which means many of these houses will simply go back into California’s housing market.
A finite amount of houses means prices go up, but if there’s a sudden influx of homes available, then the prices might go down a bit.
News like this could be good or bad. It’s good for folks who think that home prices in California are too high. Perhaps, people who couldn’t afford a home before might be able to after this measure passes. This change might be good for them.
It could also be bad for folks who are trying to sell their homes since their property might not be worth as much.
Some worry that a few heirs might keep their inherited property, even with the spiked taxes, and pass down those expenses onto renters. California is already dealing with a rent crisis, and things shouldn’t get worse for people. This could lead to more homelessness, which the state isn’t managing well.
A lot of people, even people with good-paying jobs, can’t afford rent in this state.
No one knows how this measure might change the housing market in the state, but there’s a reason to be happy and skeptical about it.
Californians have a lot to think about when they head to the ballot box. The proposition has been popularized even more because of the wildfires the state has suffered. Some of these homeowners were 55 and older. The proposition unshackles them from fire-damaged homes and gives them a chance to start over. They get a new house and get to keep their tax rate.
This idea might be enough to convince Californians to pass this proposition, but it seems like the housing market is going to have to patiently wait for the results to come in on election day. The measure has been in the works for two years and has the backing of California Association of Realtors.
Feature photo by David McBee
