Property tax hikes slowed last year even as home sales prices took off

The average property tax bill rose 1.8% in 2021. This is the smallest increase in years, despite record house price growth, according to a new report from Atom Data Solutions.

Homeowners saw their property taxes rise less in 2021 than the year before, despite an acceleration in house price growth.

Governments taxed single-family homes to the tune of $328 billion last year, according to a recent report by Atom Data Solutions. This 1.6% annual increase was slower than the 5.4% increase recorded the previous year, even as home sales prices exploded during the same period.

The wide discrepancy between taxes paid and recent sales prices illustrates the disconnect between market prices and the tax assessment process, according to Rick Sharga, vice-director of Attom President of Market Intelligence.

“It’s no surprise that property taxes rose in 2021, a year when home prices across the country rose 16%,” Sharga said in the report. “In fact, the real surprise is that tax increases haven’t been higher, suggesting that tax assessments are lagging behind rising property values ​​and will likely continue to rise in 2022.”

Even after accounting for new homes added to tax rolls, the average property tax levied on a single-family home — $3,785 in 2021 — rose 1.8%, the slowest annual pace in the past five years. years. Effective tax rates fell from 1.1% to 0.9% during this period.

The national property tax growth rate was held back primarily by slow growth in the country’s largest metropolitan areas, the report noted.

Metropolitan areas of at least 1 million people saw much slower growth in the average property tax bill. Most areas outside of these metros have seen their taxes rise at a rate above the national average.

The report focused on property taxes levied by states, counties and local governments in 220 metropolitan areas. Since these jurisdictions have different tax rates and policies for changing them, effective tax rates vary significantly from region to region.

Those rates were highest last year in Illinois, New Jersey, Connecticut and Vermont, where property taxes each exceeded 1.5% of a home’s assessed value.

At the other end of the spectrum, property tax rates were lowest in Hawaii, Alabama, Utah and Arizona. None of these states exceeded an effective rate above 0.5%.

New Jersey’s combination of high rates and high property values ​​meant it had the highest average property tax in the nation last year at $9,476. That’s more than 10 times the average property tax in West Virginia, where the average homeowner pays the least in the United States in property taxes.

Property taxes are part of the picture of rising homeownership costs. Unlike a fixed rate mortgage payment, property taxes generally increase over time along with the value of a home and are subject to rate increases or decreases by local tax jurisdictions.

Homebuyers should consider property taxes in their area when considering whether they can afford a particular home, Sharga said.

“Prospective owners often fail to include property taxes when considering the cost of ownership,” Sharga said in the report. “But, especially in some of the country’s most expensive markets, property taxes can add thousands of dollars to annual homeownership costs and potentially be the difference between someone being able to afford a home or not. “

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Penny D. Jackson