Homeowners shell out a lot more in property taxes than they did in 2019
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Property taxes for homeowners are up significantly across the country — including in Austin — thanks in large part to surging home values since the onset of the Covid-19 pandemic.
Nationally, property taxes have increased nearly 30% since 2019, to a monthly median payment of $250, according to a recent analysis by Redfin Corp. (Nasdaq: RDFN). That increase comes despite the average effective tax rate across the U.S. now being 0.67%, down from 0.77% in 2019.
Among the states and metro areas analyzed by the firm, property taxes made up more of a monthly housing bill (19.8%) in Austin, than anywhere else in the country. Other Texas cities like San Antonio, Houston and Fort Worth saw similar percentages of around 18% and 19%.
Daryl Fairweather, chief economist at Redfin, said most municipalities don’t update their assessments on an annual basis. There's frequently a lag between when home values go up and when that's reflected in a home-value assessment.
"Some of those increases in values that happened in 2020 and 2021 are still being baked into assessments," she said.
And while some municipalities have adjusted their assessments and lowered their effective tax rate to account for higher-value real estate, others haven't because inflation has caused costs — including to manage and run a municipality — to rise rapidly.
If property taxes are a primary way of funding municipal costs, Fairweather said, officials in those cities could be expecting homeowners to chip in a larger share overall.
The rise in property taxes also comes as much of the commercial real estate market — office buildings in particular — has seen its value dissipate since the pandemic. With the value of many once-high-dollar properties falling — sometimes considerably — local governments are recouping less revenue from the commercial side of the property tax ledger.
Fairweather said while she isn't aware of any examples of municipalities adjusting property taxes strictly because of the commercial real estate market downturn, it could be a logical shift for some governments to try and offset a decline in commercial tax revenue by raising taxes elsewhere.
It's another example of how the cost of homeownership — beyond purchasing a home — continues to rise.
Rising taxes hit pandemic migration hotspots
While homeowners' property taxes are rising in most areas of the country, there are variances across states and metro areas.
Florida and Texas, for example, get a significant portion of their revenue from property taxes. Thanks largely to pandemic-fueled population gains in those states, home values there have grown substantially in the past five years.
For many Texans, property taxes today make up roughly 20% of a household's monthly housing bill, Redfin found. That's significantly higher than the 8% share in a typical homebuyer's housing bill nationally.
Homeowners in New York and New Jersey have the highest tax bills by dollar amount, led by Nassau County, New York, with a median monthly property tax payment of $905, according to Redfin. That's followed by Newark, New Jersey ($848), New York ($821), San Jose, California ($782), and New Brunswick, New Jersey ($706).
New York, Newark, Austin, Nassau County and New Brunswick homeowners also spend the biggest share of their income on property taxes nationally — between 7% and 10%. That's compared to the typical 4% nationally.
In Florida, a triple whammy of sorts is impacting property tax bills: higher property values, rising property tax rates to invest in climate-resiliency investments as the state grapples with more powerful storms, and a larger population with bigger needs for government services like schools and infrastructure.
Three Florida metro areas — Jacksonville, Tampa and Miami — are among the top five metros nationally, according to Redfin, where property taxes have increased the most since 2019, at 59.6%, 56.7% and 48.1%, respectively. Indianapolis saw the biggest increase, at 66.7%, in that timeframe, followed by Atlanta, at an increase of 65.8%.
Fairweather said in a place like Florida, higher property taxes are likely to weaken demand for homes and potentially drive up supply. That's already being observed in the state's condo market, where new regulations passed in the wake of a deadly condo building collapse in 2021 have driven up the cost of condo ownership and weakened demand for those units.
"That could be a precursor [for the broader housing market] if taxes, insurance and maintenance costs are going up," she said.
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