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Home Price Appreciation: A Double-Edged Sword

Katie Jensen
Dec 14, 2021

Homeowners’ equity has been pushed to record heights, but the housing boom is increasing property taxes to levels they can’t afford. 

KEY TAKEAWAYS
  • The good news is that homeowners’ equity has been pushed to record heights.
  • The bad news is that growing inflation is a blow to the stomach for some homeowners who have been struggling with underwater mortgages since the Great Recession, and the housing boom is increasing the tax burden to levels they can’t afford. 
  • In states like Virginia, Georgia and New York, real estate-owned foreclosures have increased throughout 2021, while they’ve fallen in states like  New Jersey, Mississippi, Delaware, Connecticut and New Mexico.

As inflation continues to swell, national home prices are appreciating by double-digits, providing homeowners a mixed bag of good news and bad. The good news is that homeowners’ equity has been pushed to record heights. The bad news is that growing inflation is a blow to the stomach for some homeowners who have been struggling with underwater mortgages since the Great Recession, and the housing boom is increasing the tax burden to levels they can’t afford. 

“Home price appreciation has become a double-edged sword,” said Knock co-founder and CEO Sean Black. “Until recently, lack of home price appreciation has been attributed to underwater mortgages and high foreclosure rates, but in 2021 upticks in foreclosures are more a result of rising home values pushing at-risk homeowners over the edge with increased tax burden. Going forward, property tax increases may exacerbate foreclosure rates in states where unemployment, income inequality and debt-to-income ratios are prevalent.”

In states like Virginia, Georgia and New York, real estate-owned foreclosures have increased throughout 2021, while they’ve fallen in states like  New Jersey, Mississippi, Delaware, Connecticut and New Mexico – a trend that is expected to continue since the government forbearance program has ended.

A new analysis released by the digital homeownership platform, Knock, found that the nation’s most recent home price growth is a heavy burden for homeowners already struggling to make mortgage payments. They are at the greatest risk of foreclosure if property taxes continue to rise. 

States with the most property foreclosures throughout 2021, including Virginia, Georgia and New York, saw property values appreciate between 18-21%, while property taxes increased 9%,14% and 21% on average, respectively. Property tax assessments utilize recent home sale values, which is why many homeowners are seeing their tax bills skyrocket – for that, they can thank the housing boom and the overall increase in market values.  

From 2019 to 2021, home prices appreciated year-over-year by 22% in Connecticut, 20% in New Jersey, 19% in Delaware and New Mexico, and 14% in Mississippi. This represents nearly 15 to 20 times the growth averages accumulated in the prior decade. 

From 2009 to 2019, home prices in Connecticut were still 11% below their peak price in 2008, while Delaware remained down 6%. During the same time period, home appreciation in New Mexico (11%), New Jersey (10%) and Mississippi (8%) grew slower than the national average of 23%. 

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