ASSESS//mike1/mark2nd
By HOWARD FINE
Staff Reporter
Local real estate values finally have caught up with the region’s booming economy, with the total assessed value of L.A. County properties rising 6 percent in 1998, the sharpest jump since 1992.
The average assessed value of an L.A. County single-family home posted an even stronger gain of 9.7 percent, to $228,600. For local properties of all types, the aggregate assessed valuation rose $30 billion in 1998, to a record $533 billion.
“This is the result of the big, hot real estate market we had last year,” said L.A. County Assessor Kenneth Hahn. “And that was directly related to the strong economy.”
Low interest rates, low unemployment and high levels of consumer confidence all contributed to the run-up in property values, he said.
The higher assessment figures are good news for homeowners who are seeing increases in their home equity stakes. They also mean more revenues for long-starved local government coffers.
The assessed valuation figures compiled by the Assessor’s office are based on actual property transactions and thus are more comprehensive than the property value surveys released by real estate tracking groups.
Hahn said he expects to see a similar increase next year, despite a recent rise in interest rates.
“The rate increases will really only affect values for the second half of the year, and even that impact I expect will be minimal,” Hahn said. “The local economy is still fundamentally sound.”
The 6 percent increase, while the highest in years, is only about half the rate during the peak of the real estate boom in the late 1980s.
“This is a much more sane expansion,” Hahn said. “During the late 1980s, we were seeing rampant speculation. Property values were constantly being bid up. We started to see a little bit of that early last year, but it cooled when the stock market jitters hit last summer.”
The average assessed value of a single-family home is still $10,000 short of the $238,600 peak reached in 1991. However, if home prices continue to increase this year at anywhere near the same pace as 1998, that 1991 peak will be surpassed in next year’s assessment roll. The means the average home will have recovered all of the value lost during the recession.
As was the case in 1997, the hottest real estate markets were the beach cities, along with other affluent areas throughout the region.
Westlake Village topped the list with the greatest percentage change in property values, a 13.1 percent increase. The jump was due largely to its proximity to the burgeoning 101 Technology Corridor, which stretches from Calabasas to Camarillo. Hundreds of high-tech startups have sprung up along that stretch of the Ventura (101) Freeway in recent years. Calabasas also reaped the benefits of the technology surge, with a 9.9 percent rise in property values.
Beverly Hills posted a gain of 12 percent, largely because of increased demand for upscale homes and a significant amount of new construction, Hahn said.
Manhattan Beach was close behind at 11.7 percent; Hahn cited the desirability of properties close to the beach and the building of a new film studio there.
The robust property increases were not limited to coastal and upscale communities. Both the City of Industry and City of Commerce came in with above-average increases of 7.7 percent, thanks to intense demand for industrial space. In the City of Industry, there also was substantial new industrial construction last year.
Only three local cities suffered a decline in assessed value last year. Baldwin Park had the worst showing, losing 7.7 percent. However, that decline was due to the removal from the tax rolls of a $250 million parcel owned by Kaiser Permanente, which built a non-profit hospital on the site last year. (Non-profit institutions are not taxed; therefore, those properties are not included on assessment rolls.) Excluding that parcel, Baldwin Park’s assessed valuation increased about 2.5 percent in 1998, Hahn said.
The other two cities that showed net declines in property values were Lancaster and Palmdale; however, both of those declines were less than 1 percent.
In the city of L.A., where 38 percent of the county’s total assessed property value is located, the aggregate value rose 6.8 percent in 1998. The county’s second-largest city, Long Beach, posted a relatively meager 1.7 percent gain, despite a booming waterfront.
On a regional basis, L.A. County is lagging behind the torrid property value increases of Orange and San Diego counties, which last year posted gains of 8.7 percent and 10.8 percent, respectively.
Hahn attributed the difference to the fact that both those counties have smaller property value bases than L.A. County, but he conceded that both counties have been booming. (Orange County’s unemployment rate has been below 3 percent for most of this year; in L.A. County, it only recently dipped below 6 percent.)
San Diego and Orange counties’ property value increases were on a par with that of Santa Clara County, which encompasses the Silicon Valley. Property values there rose 10.5 percent in 1998.
About 45 percent of the $30 billion increase in L.A. County’s total assessed property value in 1998 was due to properties being sold or transferred, Hahn said. (Under Proposition 13, residential property value assessments are allowed to rise no more than 2 percent per year, unless a property changes ownership. Then the assessed value can jump to reflect local market conditions.) Inflation adjustments allowed by Proposition 13 accounted for about 22 percent of the 1998 jump; new commercial and residential construction comprised about 10 percent.
This year’s assessment roll also showed a significant upturn in property values affected by another ballot measure, Proposition 8. That law allows properties to be reassessed when it is believed the assessed values are out of line with current market values. Then, when market conditions improve, county assessors can restore the assessed value that existed before the reduction was granted.
During the mid-’90s, owners of more than 366,000 properties in L.A. County sought and were granted Proposition 8 relief. But during 1998, county assessors restored about one-third of those properties, either fully or partially, to their previous level, resulting in a $7.2 billion gain to the assessment roll. (Other properties, particularly in places like Lancaster and Palmdale, were still being granted Prop. 8 reductions last year, so the net effect of Prop. 8 readjustments was a gain $4.9. billion.)
“We did manage to get the word out so that most of the property owners hit with these reassessments were not surprised,” Hahn said.
In another sign of the good economic times, the number of foreclosures fell 22 percent in 1998, to 27,484 properties. That was the lowest level since 1993.
