How to Understand the LA County Annual Assessment Roll
|How to Understand the Annual Assessment Roll
Last month, Los Angeles County Office of the Assessor released the annual Assessment Roll. The Assessment Roll is the foundation that property taxes are based upon. It also serves as a tool for local government when preparing their budgets in anticipation of property tax revenues, and it provides some insight into the health of the real estate market. Assessments are based on the value of property as of Jan. 1, 2021, also known as the lien date. For 2020-2021, the Roll grew 3.7%. This 3.7% increase in assessed property values represents the 11th year of consecutive growth.
Although most Los Angeles County homeowners are concerned with their own property values and assessed values for property taxes, many taxpayers may not fully understand what the values on the Assessment Roll mean and how it can be used to understand the local real estate market.
There are many factors that are considered when analyzing the Assessment Roll. The following are a number of factors that indicate how the local market has responded in light of the COVID-19 pandemic:
Transfers are generally the most significant factor that adds value to the Assessment Roll. Every time a property is bought or sold a transfer and change of ownership occurs, meaning that there will generally be a reassessment to the current market value – which in turn adds growth to the Assessment Roll and ultimately, to more property tax revenue.
Transfers added $44 billion in value to the Assessment Roll. The added value was an indirect result of the economic conditions brought on by the COVID pandemic. There were several additional factors which decreased Roll value that were influenced by COVID. These factors slowed Roll growth compared to previous years. The Consumer Price index (CPI) increase, as mandated under Proposition 13, is one of the factors which played a key role in the lower than normal year-over-year property value growth. The CPI for 2020-2021 was limited to 1 percent (1.03%).
Median Sales Price
The median sales price (MSP) in Los Angeles County for single-family residences (SFR), not including condominiums, rose 21.9% year-over-year to an all-time high in June with the MSP for an SFR at $816,888, the highest ever recorded. The unusually high jump in prices has been driven by low inventory combined with historically low mortgage rates.
Consumer Price Index
Increases to a property's assessed value are limited by Proposition 13 to 2% maximum annually. The inflation adjustment is one of the most significant contributors to the growth of the Assessment Roll.
This year the California Consumer Price Index (CPI) is 1.036%, which is below the allowable limit of 2% and reflects stalled economic growth during 2020. The CPI added $16.4 billion to the 2021 Assessment Roll.
The lower than normal increase was a significant factor in lower property value growth compared to the previous few years. For perspective, the CPI has reached its maximum allowable increase in eight of the past 11 years. If the CPI had reached that 2% increase threshold this year, the Assessment Roll increase would have been 4.67%, which would have added another $16 billion in value to the Roll.
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