A temporary reduction in value occurs when the current market value of real property is less than the current assessed (taxable) factored base year value as of the lien date (January 1st of each year). In 1978, California voters passed Proposition 8, a constitutional amendment to Article XIIIA that allows a temporary reduction in assessed value when real property experiences a decline in value.
Real property may increase or decline in market value from one lien date to the next lien date; however, a property will not benefit from a lower assessment unless its market value falls below the current factored base year value.
If you purchased your property in 2010 for $500,000, but on January 1, 2023, its market value was $425,000, it may be subject to a temporary reduction in value for the lien date January 1, 2023, affecting the property tax value for the regular tax bill due in fiscal year 2023/24.
If you purchased your property in 1998 for $275,000, and your factored base year value for 2023/24 is $422,031 because of the annual inflationary increases prescribed by Proposition 13, and the market value as of January 1, 2023, is $525,000, then you would not be eligible for a temporary reduction in value for the tax year 2023/24. In this example, even if market values in your neighborhood declined since 2022, the assessable value of $422,031 is less than the fair market value and therefore it is not eligible for a temporary reduction.