After 24 years, CA Proposition 58 still makes it possible for new property owners to avoid property tax increases when inheriting property from their parents. Or vice versa. And of course, as we just indicted, new homeowner’s pay taxes that are based on established Proposition 13 factored “base year value”, and not on updated, reassessed market value at the time real property is inherited. Just as you may have inherited your parent’s home when they passed away.

Many middle class homeowners in California are receiving incredible value from CA Proposition 58, transferring real property to adult children without tax reassessment throwing them into a financial crunch. And this is particularly meaningful to people in older age ranges, where income is generally stagnant, or at least fixed; and net worth tends to decrease noticeably. Anything like severe tax hikes, or any unexpected fees or debts for that matter, are particularly unwelcome by older middle class Americans.

Moreover, to maintain CA Proposition 58 tax relief for real property that has been transferred to them by parents or other relatives – heirs or beneficiaries will often convert property and/or land to other uses, such as turning a property into a rental, or a vacation home, or they might lease out transferred land for farmland, or other commercial uses. Click here for more information on California Property tax by county…

Occasionally, this creates conflict with other family members who would simply prefer to sell off all their property shares right away for fast cash. However, if they can be convinced, with respect to the benefits associated with holding on to transferred property, and making good use of the Proposition 58 tax break – those heirs or beneficiaries can usually be turned around.

Now, interestingly enough, there are a number of people in California who believe that Prop 58 tax relief is “likely” (that is to say, “probably”) contributing to “a critical” decrease in homes for sale in California – driving an outcome that is supposedly negative for regular folks in California who are looking for a home to purchase – and somehow benefiting the very wealthy; encouraging them to hold on to their properties for ever and ever, and never sell.

According to a small but very vocal number of people in the media who are disseminating this point of view, both home seekers and realtors are soon going to be in “desperate need” in the near future to locate homes for sale… and this somehow is, even now, throwing the normal demographic eco-system into total disarray. While somehow mega-benefiting the ultra rich.

This segment of urgent home-seekers is supposedly being victimized by a critical lack of somewhere between 60,000 and 80,000 homes that are now not in the market, for sale. According to these folks, this phenomena, caused by Proposition 58, is turning the normal state of affairs literally upside down due to the passing of homes between parents and children every year – without standard property value reassessment occurring, to determine “true” property value and the subsequent tax hit. That’s roughly 10% of all property transfers in California.

We encounter this argument consistently, generally from the same media and political sources – yet never with any specific statistics to back up these claims, as far as knowing with some degree of assurance that this issue, although a somewhat manufactured issue, is affecting a considerable number of inherited, sold or gifted properties in California every year…

Yet these dramatic claims, always projecting outcomes in the “near future” are always devoid of any facts or data that actually verifies that 60,000 to 80,000 plus home transfers every year are supposedly throwing the natural order of California real estate into total disarray.

In fact, the people making the argument that CA Proposition 58 is in fact the driving force behind this alarming, shrinking number of homes available for sale in California – causing doom and gloom to descend on California home seekers in 2020 and in years to come. In fact, this point of view goes so far as to suggest that all the thousands of empty handed home seekers on the West Coast are soon to be bereft and practically homeless!

However. No one taking this stand has actually presented, or even attempted to present, any factual data that proves Proposition 58 is actually causing this “shrinking inventory” of houses for sale in California. Articles in newspapers such as the LA Times or the San Francisco Chronicle only print quotes from nervous realtors, or academics merely projecting a personal opinion… based on sketchy anecdotal evidence at best; yet never presenting any convincing data to back these claims up.

Secondly, it is important to note that the same parties cultivating and advancing all of these claims also freely admit that Proposition 58 does, without question, protect the adult children of parents transferring property to them, from steep tax increases on inherited property. Just as Proposition 13 does, in fact, protect homeowners from egregious property tax increases year in, year out.

Thirdly, and this is where the bottom line issue emerges – this “whisper campaign” is quite possibly driven by anxiety and panic experienced by seasoned realtors and brokers that are looking to preserve their golden market, which may be experiencing modest shrinkage right now. A market that is not decreasing based on a few thousand home transfers, but that is experiencing modest shrinkage due mainly to the fact that (regardless of what Cable & Network TV News repeatedly tells us) – the job based economy in the US is not in fact booming, as they would have us believe…

Our job based economy is in itself decreasing slightly, in manufacturing, in electronics and computer sales, in auto sales, and within various other formerly active verticals where white collar and high tech jobs are tightening, not expanding. So therefore fewer white collar folks with disposable income are putting their old home on the market and immediately purchasing a 7-figure home the first chance they get; and instead may simply stay where they are, or possibly even down-size, which many middle class and even upper middle class seniors in their early to late 60s are doing these days, and have been for some time.

So instead of blaming Proposition 58 for the fact that homeowners in California are holding onto their old home for a longer period of time rather than putting their house on the market after 9 or 10 years – folks in the media advancing these theories perhaps should take a closer look at the fact the white collar and upper middle class folks who typically drive or spike the California real estate market, are these days waiting a lot longer in order to feel comfortable enough to put their modest home on the market, and actually plunk down a $75,000 or $100,000 cash down-payment towards a new home purchase in a very nice area, where realtors are struggling to sell $800,000, $1.5M or $2M properties in upscale neighborhoods.

As someone once said, “It’s the economy stupid!” It’s the overall job based economy, not Proposition 58, causing a slow-down, or soon to cause any decrease, in real estate sales throughout the state of California.