If you’re 55 or older and want to move into a new home, your plans could be affected by the newly passed Proposition 19. Those in this age group who intend to sell their current home and buy a new one will benefit from the tax changes in Prop 19, while those who plan to pass their property on to a child may find Prop 19 has made their plans less attractive. Here is more information on Prop 19, how it may affect California’s real estate market, and what that may mean for home buyers.
What is Prop 19?
Proposition 19, which voters approved in the November 2020 election, allows older California homeowners to bring tax benefits with them when they move to a new home. Homeowners who are 55 or older will now be able to blend the taxable value of the house they sell with the value of the newer, more expensive home they buy. Those eligible can transfer their tax basis anywhere in the state when they buy a home of greater value than the one they sell. Previously, homeowners could only perform limited transfers to certain counties and homes with the same or less market value.
Prop 19 also increases the number of times an eligible homeowner can transfer their tax assessments. Those who are 55 or older and have lost a home in a natural disaster or have severe disabilities can transfer their tax assets three times instead of only one time before Prop 19.
The third provision in Prop 19 requires market-value reassessments for inherited properties and will not be used as the primary residence for the heir. This limits the availability of the parent-child exclusion for real estate tax assessments. Before the passage of the proposition, parents could transfer a principal residence to their heirs with no fair-market reassessment even if the heir chose not to use the property as their primary home. Heirs could benefit from the same property tax basis their parents had and could also have secondary or vacation homes of up to $1 million transferred to them without increasing property taxes.
How Prop 19 Will Positively Affect the Real Estate Market
In addition to freeing up inventory and helping older individuals move without paying steep taxes, the proposition also added up to $2 billion to the California state budget. This money will be used to increase fire protection, create affordable housing, develop homeless programs, and improve other local services to better thousands of California neighborhoods. Better and safer neighborhoods lead to more homes being built or purchased, further strengthening the state’s real estate market.
How Could Prop 19 Negatively Affect the Real Estate Market?
Tips on Buying Napa Valley Homes
Prop 19 will likely not have a noticeable effect on most homebuyers in the Napa Valley region. The area is still experiencing a strong seller’s market, though it may be challenging to find a home you want among the limited inventory. If you find a house you want to make an offer on, you need to act quickly to get ahead of your competition. Here are some tips to help you buy a Napa Valley property in the current real estate climate.
◾ Get pre-approved. In a strong seller’s market, offers from buyers who are not preapproved for a loan may not even be considered. When you get pre-approved, you are not only showing the seller you are serious about buying the home, but you also facilitate the loan process.
◾ Don’t hesitate. Napa Valley homes are being sold within days of being listed in this market. If you take a weekend—or even a day—to think about making an offer, you may lose out to a more motivated buyer. When you find a home you love, be ready to make an offer on the spot.
Though Prop 19 may not directly affect you, it may change the California real estate market in the future. However, there is no reason to let this keep you from buying Napa Valley real estate and settling into the home of your dreams. Ready to buy? Contact an experienced local agent like those at Coldwell Banker Brokers of the Valley to get the process started.
