While housing prices continue to skyrocket, not all of the news is bad for homebuyers.
Property taxes were predictably higher in 2021, but only by 1.6%, according to a new report from Attom, a data analytics company. That’s despite an average rise of 16% in home prices.
The average tax rate on a single-family home in the U.S. last year jumped from $3,719 to $3,785. That’s the smallest increase in five years, and it compares to a 5.4% increase from 2019 to 2020.
The only problem with that? It “suggests that tax assessments are lagging behind rising property values and will likely continue to go up in 2022,” says Rick Sharga, executive vice president of market intelligence at Attom.
Location, as it always does in real estate, makes a big difference in the changes people are seeing in their tax rates. In fact, 74% of markets saw increases larger than the national average, but those were in smaller metro areas. Nashville, for instance, saw a 27% increase, while Milwaukee was up 18.6%. Baltimore and Grand Rapids residents are paying 12.3% more. And Louisville property taxes jumped 11%.
Many major markets, however, saw notable decreases in their average property taxes, which kept the national average lower. Pittsburgh was down 35.1%. New Orleans slid 20.2%. Houston fell 18.7%, while Dallas was down 12.2% and Austin fell 7.7%.
New Jersey was once again the most expensive state when it comes to property taxes, averaging $9,476 in 2021. Compare that to just $901 in West Virginia.
“Prospective homeowners often fail to include property taxes when considering the cost of homeownership,” Sharga said. “But especially in some of the higher-priced markets across the country, property taxes can add thousands of dollars to annual ownership costs, and possibly be the difference between someone being able to afford a home or not.”
Mortgage rates are on the rise, which is cooling the housing market, but supply restrictions are still the dominating factor. As a result, most major industry insiders are not expecting a correction, nor do they expect prices will fall in 2022. Zillow forecasts that the rate of year-over-year home price growth will come in at 17.8% in February 2023. Meanwhile, CoreLogic says it will come in at 5%. (Both predictions, though, do represent a slowdown in the pace of price increases.)