Oh, the drain on the joys of home price appreciation, as homeowners who have gleefully watched their properties double in value since the beginning of the pandemic now experience the “catch” that accompanies those equity gains — higher property taxes.
Property taxes vary by state because states have different ways of collecting revenue from their residents. For example, Texas collects no personal income taxes, but ranks sixth in the country for the highest property tax rates.
Like home insurance, property taxes represent an ongoing, variable cost of homeownership that affects affordability for those with and without mortgages. For originators, property tax estimates influence debt-to-income (DTI) calculations used to qualify borrowers for a monthly payment.
Nationally, property tax payments rose an average of 5.5% from 2023 to 2024, according to new research published by CoreLogic, and 27.4% since 2019 — just one of the homeownership expenses claiming an ever larger share of consumers’ monthly incomes.
Property Tax Sticker Shock
“With nearly one-third of American households now considered cost burdened, concerns around housing affordability can no longer be ignored,” CoreLogic’s authors write. “It’s clear that the increasing cost of homeownership is an issue that requires our attention in order to continue to provide shelter for the nearly 130 million households in the U.S.”
The median U.S. property tax payment in 2024 was $3,018. Homeowners in Colorado, Georgia, and Florida experienced the largest annual property tax payment increases from 2023 to 2024 with rises of 10.6%, 10.3%, and 9.5%, respectively.
Those states also experienced the largest increases since 2019, at 52.9%, 51.5%, and 47.5%, respectively. Per CoreLogic's report, Colorado home prices have grown 47% since 2019, Georgia home prices have grown 65%, and Florida home prices have grown 73% against a national average of 51.6%.
For borrowers seeking affordable homeownership, assessing a state’s property tax burden functions as a balance between the prevailing tax rates and the pace of home price growth. Low tax rates will not necessarily translate to the lowest property tax increases because tax increases are a function of rising property values.
Colorado, for example, has the third-lowest property tax rate in the U.S. at 0.52%, but has experienced the greatest increases in median payments.
North Carolina is another ostensibly affordable state that has experienced a surge in property taxes alongside a rise in the state’s home prices. Property values in N.C. have outpaced those of regional neighbors like South Carolina and Virginia, growing 13.9% annually. Even with one of the most affordable tax rates in the U.S. at 0.79%, median payments in N.C. in 2024 were $1,750.
Future Of Home Price Growth
Despite rising expenses, home sales marched along at a slow, yet steady pace through 2024, contributing to continued home price appreciation, though at a slower rate. In December, CoreLogic reported that home price growth had remained relatively flat since the summer, only eking out gains in certain pockets of the country, with continued deceleration likely in 2025.
Economists at Fannie Mae have made similar projections of a sustained slowdown in home prices through 2025 and 2026, given that elevated mortgage rates and four years of rapid appreciation have taken the wind out of the price-growth sails.
Through the second half of 2024 slowing home price growth has concentrated in the southeast and Texas where markets are softening.
Recent research from Milliman, a global actuarial and consulting firm, indicates that slowing home price appreciation has raised the default risk on conventional purchase mortgage loans to match the default risk for refinances for the first time since 2021.
Mortgage delinquencies on conventional purchases loans rose to 2.12% for loans acquired in the third quarter of 2024, up 9 basis points from 2.03% in the previous quarter.
