Merced County was hit hardest when the housing bubble burst -- dropping home values by double digits while also lowering property taxes. Now that the market is recovering, taxes may go up well above the 2 percent max allowed through Proposition 13, a 1978 voter-approved initiative. That's because Proposition 8 -- passed that same year -- allows taxes to increase more than 2 percent if the assessed value of a home decreased during a housing bust.
"Prop 8 kicks in when you have a market much as we've had throughout the state where the value is plummeted. We have people who were in homes and had Prop 13 values [that] were in excess of the market value," said Merced County assistant assessor, Barbara Levey.
Housing experts say while some homeowners may see a slight increase in taxes, this will only increase the value of their home.