If you are planning on staying in the area for work, I would look carefully at rental and purchase alternatives. You may find that your mortgage payments are less than rent for something similar. Also, many of the landlords that bought when you did are probably tiring of the hassles and will be taking profits over the next couple of years, so the neighborhood may change again.
However, if you are in an outer ring suburb where the schools are deteriorating and the crime rate is going up, now might be a good time to sell and bank your profit. Those areas will not appreciate well in the future. As interest rates go up, first time buyers and investors will drop out of the buyer pool. Again, you need to look at rental and purchase alternatives to make a reasoned decision.
If you sell and buy again, you will lose the Prop 13 benefit, but you will also lose the transaction costs of selling and the mortgage and moving costs of buying. Those costs are not trivial.