Continuing last year's trend, Silicon Valley's economic recovery has resulted in more homeowners coming up from under water, with the latest figures revealing that about 8 percent of properties remain at values lower than what they were pre-recession.

The Santa Clara County Assessor's Office announced Wednesday that the expected recovery means more people will see their property taxes increase, but maintained that the hit -- which can be as high as 24 percent in some areas -- is a good thing in the bigger picture.

"Equity is coming back, and people are breathing a sigh of relief," said David Ginsborg of the assessor's office. "Properties are worth more than what people paid for it. Of course that means an increase in taxes, but nobody likes to buy a piece of property and have it worth less than they paid three years later."

By state law, when a property's market value drops below what was paid for it, the assessor has to recalculate taxes to reflect that decline. But if the price bounces back, the assessor can increase the property valuation at more than the 2 percent annual limit set by Proposition 13, up to its original tax base.

"It's a good news bad news thing," said Colleen Badagliacco of Legacy Real Estate in San Jose, a former chair of the California Association of Realtors task force on distressed properties. "The lord giveth and the lord taketh away -- we all like to buy low and sell high and keep property taxes low and reap the equity but it doesn't always work that way."


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According to the report, in 2012 there were 136,000 residential and commercial properties assessed below their value when purchased. In 2013, that number dropped to 81,000.

"This year, even with surging market values, as many as 40,000 properties are expected to remain below their Proposition 13 value," said Assessor Larry Stone.

Stone said the area seeing the largest growth this year is South County -- Gilroy and Morgan Hill.

"Those were the areas hardest hit, where property values declined by as much as 60 percent," said Stone. "This year they are leading the resurgence."

Other areas of the county, particularly in the north, saw property values surge much more quickly. Now that the southern areas are bouncing back, property owners there can expect to see valuations rise significantly.

"Gilroy will see increases as much as 24 percent, Morgan Hill as much as 19 percent," said Stone, who added that it also depends on the type of property, with condominiums seeing a higher assessment growth than single family homes.

Stone said that property owners should find solace in the fact that every $1 dollar in increased taxes means a $100 jump in equity.

Badagliacco said there's been a building boom in South County, and some of the reassessed value is due to new properties that list for $700,000 or more that boost the value of the area in general.

"It definitely helps pull them up," she said. "It drives people to Morgan Hill or Gilroy to look at homes, and lets say you're a savvy shopper and you see a home for $800,000 to $900,000 with all the bells and whistles. You'll find a fairly good selection of older homes with a similar square footage and might be able to save $100,000 by looking at them."

Homeowners will receive notices of assessed values after they are finalized by July 1. Those who disagree with the new appraisal can contest the judgment; Instructions will be provided along with the notice.

Contact Eric Kurhi at 408-920-5852. Follow him at Twitter.com/erickurhi.