The growth rate for property tax payments across the country increased by more than four times annually at the end of the first quarter, according to new analysis by the National Association of Home Builders.
The year-long increase comes after a prolonged period of home-price growth thanks to a hot sales market, which drove property values up at a record pace in 2021 and early 2022. Properties are taxed based on the assessed value of the home, but changes frequently lag price movements of the housing market by two to three years, depending on the frequency at which jurisdictions make adjustments.
Although the rate of appreciation appeared to be slowing at the start of this year, with values of homes in some markets even down from a year ago, the elevated levels added $173.6 billion in revenue to the coffers of state and local governments around the country between January and March. In the four quarters prior, homeowners paid approximately $713.5 billion in property taxes nationwide.
The first-quarter numbers, though, came in approximately 40% lower than the $290.3 billion collected in the last three months of 2022 but were up 4.8% from $165.6 billion a year ago.
The cumulative four-quarter running total remained near the same level as at the end of 2022. But the rate of growth of tax payments, based on trailing four-quarter numbers, was at 6.9%, quadrupling since early 2022. The rate is also more than double the 15-year average of 3.3%, NAHB said.
Property taxes made up 35.4% of state and local tax revenue in the year-long period ending March 31, edging up slightly from 34.7% in the fourth quarter. By comparison, individual income taxes accounted for 29.1%. Sales and individual corporate taxes had a share of 28.3% and 7.3%, respectively.
On a single-quarter basis, the share of property taxes relative to total revenue also increased to 36.7%, up from 33.6% in the same period last year. But as it has for the last five quarters, it remains below the 37% average that characterized the market before the recent housing boom began, according to NAHB’s analysis of U.S. Census Bureau data.
While the percentage share may differ, incoming property tax collection numbers have not been affected as much by some of the economic headwinds other revenue sources may face, the association said.
Nonproperty tax receipts are more sensitive to fluctuations in economic sentiment and the business cycle, with accompanying changes in consumer spending, according to David Logan, senior economist and director of tax and trade analysis, in a research post.
On the other hand, “property tax collections have proven relatively stable, reflecting the long-run stability of tangible property values as well as the effects of lagging assessments and annual adjustments,” he said.
NAHB’s analysis comes as housing researchers continue to find affordability decreasing for new home buyers over the past few months. Monthly payments, inclusive of fees and taxes, were up by over 14% annually according to the Mortgage Bankers Association.
Property values so far this year are trending upward again as well, despite the rise in mortgage rates over the past year. That’s due in large part to homeowner reluctance to sell. New for-sale listings are 27% below its level of a year ago for the four-week period ending June 25, Redfin said last week. The annual decline was the largest since the beginning of the COVID-19.
The total number of homes for sale dropped by 11% year over year, the online real estate brokerage also said. The lack of supply pushed the average home price back up close to $382,628, just off the all-time high set a year ago, based on Redfin data.
Also, after a period when price cuts figured into many cost negotiations, Redfin reported that the typical home for sale in the U.S. was now selling at its initial asking price for only the second time since last August.
Source: nationalmortgagenews.com