Mortgage interest rates, after peaking in October, have drifted down almost a full point to the mid 6’s. Data showing a slowing economy is trickling in, resulting in a drop in rates. Also, the inflation metric is moderating, although still elevated. If rates stay where they are or drift a bit lower into the high 5’s, I would expect buyers to emerge in early 2024, once again looking for properties to purchase.

There remains a large group of renters out there making good incomes and desiring to finally own a property.

However, the low inventory will likely remain as very few homeowners want to give up their 3% mortgage rate. This scenario of low supply and increasing demand is likely in my opinion to keep home prices where they are or perhaps moving a little higher in the coming year.

PROP 19: I recently worked with clients who were hoping to transfer their appreciated San Diego home to their child and then move to a home in Palms Springs.

I reviewed the recent Prop 19 information. Prop 19, passed a couple of years ago, primarily had headlines that residents 55 and older could transfer their property tax basis to a new property within California.

One difficulty is when people purchased property in the 1970’s and 1980’s, they established a low basis for property taxes and were paying maybe $3,000 to $6,000 per year in taxes. The result of selling their larger home, no longer needed, and moving to a smaller property is the hit in property taxes.

If purchasing a $900,000 home in a different area, property taxes would then start at $10,000 a year and increase annually from there. This effect caused many retired people to stay put in their large family home purchase 30 or 40 years ago. In order to assist this group of homeowners and allow more properties to be sold to families needing larger homes, Prop 19 allowed residents to transfer over their original property tax basis to their new home and continue paying a lower property tax.

What was NOT advertised or publicized in Prop 19 is another clause that considerably limits the availability of the parent-child exclusion for purposes of property tax assessments.

Prior to Prop. 19, a parent (or grandparent) could transfer a primary residence to their children (or grandchildren) without a new market value reassessment, regardless of how the property was to be used. What would often happen is the children would rent out the parent’s home for full market value but continue paying a much lower property tax based on the basis from when the property was purchased many decades ago. Even second homes were allowed this opportunity. But Prop 19 has eliminated this loophole, unless a child makes the home their primary residence.

So children who inherit property from their parents will have to now consider the increased property taxes when deciding to keep or sell the property and the children will now face a significant increase in property taxes.

This might result in the children deciding to sell the property instead of keeping it (which could help another family somewhere desperately looking for a home to raise their family).

MARKET REPORT (Single Family): College Area (92115): November median price up 1.7% year over year to $915,000 and with 22 homes for sale (a 10% increase) San Carlos (92119): median price down 3.6% to $969,000 with 10 homes for sale (a 37.5% decrease). Del Cerro/Allied Gardens (92120): median price down 3%, year over year to $1,045,000 with 5 homes for sale (a 79.2% decrease!!).

– Sarah Ward is a REALTOR with Coldwell Banker West. Reach her at: [email protected].