Apr 14, 2022 - Economy

Property taxes lagged in 2021 — even as real estate prices soared

Percentage change in annual average property tax amount, 2020-2021
Data: ATTOM; Map: Simran Parwani/Axiosta

Many homeowners may be shocked to hear it, but the average tax on a single-family home increased just 1.8% last year. That's despite the homebuying frenzy that drove up housing prices 16%, according to a new report from ATTOM, the leading provider of real estate records and property data.

The big picture: Total property taxes collected in 2021 rose only 1.6% nationwide — well down from the 5.4% increase from 2019 to 2020, and the second-smallest rise over the past five years.

  • Not everyone enjoyed such modest hikes: Property taxes rose steeply in cities like Nashville (27%); Milwaukee (18.6%); Baltimore (12.3%); Grand Rapids, Mich. (12.3%) and Louisville, Ky. (11%).
  • Major markets with the largest decreases in average property taxes included Pittsburgh (-35.1%); New Orleans (-20.2%); Houston (-18.7%); Dallas (-12.2%) and Austin (-7.7%).

Why it matters: The results suggest that local tax authorities weren't keeping up with skyrocketing home price valuations — a trend that could change this year, leaving lots of homeowners with sticker shock when they get their new bills.

Driving the news: The aggregate amount of property taxes levied on the nation's 87 million single-family homes rose to $328 billion in 2021, up 1.6% from the $323 billion in 2020, according to ATTOM.

  • The average tax on a single-family home was $3,785 in 2021, up 1.8% from $3,719 in 2020.
  • The latest figures resulted in an effective tax rate of 0.9%, down from 1.1% in 2020. (The effective tax rate is the average annual property tax expressed as a percentage of the average estimated market value of homes in each geographic area.)

"The real surprise is that the tax increases weren’t higher," said Rick Sharga, executive vice president of market intelligence at ATTOM.

  • Tax assessments are lagging behind rising property values, he said, "and will likely continue to go up in 2022."

By the numbers: States with the highest effective property tax rates in 2021 were Illinois (1.86%), New Jersey (1.73%), Connecticut (1.67%), Vermont (1.55%) and Pennsylvania (1.37%).

  • Rounding out the top 10 were Nebraska (1.36%), New Hampshire (1.35%), New York (1.35%), Texas (1.31%) and Iowa (1.31%).

The states with the lowest effective tax rates in 2021 were Hawaii (0.27%), Alabama (0.37%), Utah (0.39%), Arizona (0.41%) and Nevada (0.41%).

"In 2021, effective rates declined even as total taxes rose because home values went up far faster than taxes around the country," ATTOM explained. "Median values spiked by more than 10% in most of the U.S., as a glut of homebuyers kept chasing a tight supply of homes, pushing the nation’s decade-long market boom onward."

New Jerseyans are right to complain: New Jersey’s average single-family-home tax of $9,476 in 2021 led the nation, ATTOM said.

  • That amount was roughly 10 times more than the average of $901 in West Virginia, which had the nation’s smallest average levy.
  • Others states in the top five last year were Connecticut ($7,464), Massachusetts ($6,777), New Hampshire ($6,698) and New York ($6,617).
  • Others in the bottom five were Alabama ($905), Arkansas ($1,195), Mississippi ($1,243) and Louisiana ($1,248).

What's next: Rising mortgage rates and the waning of the pandemic could change the dynamics of the housing market, curtailing demand for new homes.

  • And tax assessors could get wise to the new realities and start raising rates this year and beyond.

Methodology: ATTOM said its report analyzed property tax data collected from county tax assessor offices nationwide at the state, metro and county levels, along with estimated market values of single-family homes calculated using an automated valuation model.

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