Mortgage rates are low because of COVID – but property taxes are much higher
It’s not just gasoline prices and grocery bills that are rising sharply and hitting consumers hard. Rising property taxes are also pushing up budgets from coast to coast.
U.S. homeowners have just been criticized for the largest average property tax hike the country has seen in the past four years, says property data provider Attom Data Solutions.
“Fortunately for recent buyers, they have mortgages with extremely low interest rates that somewhat limit the cost of homeownership,” says Todd Tata, director of products at Attom.
“But the latest tax figures speak loudly about the continued pressure on new and long-term homeowners to bear the rising cost of utilities,” Tata adds.
How much are property taxes going up?
U.S. homeowners in 2020 paid an average of $ 3,719 in property taxes, according to data from Attom. This is a sizable increase of 4.4% from a year earlier when the average was $ 3,561.
“The increase was double what it was in 2019,” says Tata.
More than half of the metropolitan areas analyzed in the Attom study have seen their average property taxes increase faster than the national average. Some were more than double:
Salt Lake City – 11.4%
San Francisco – 11.1%
San Jose, California – 10.8%
Seattle – 10.3%
Atlanta – 10.2%
San Diego – 10.2%
Tampa, Florida – 10%
Denver – 9.9%
Raleigh, North Carolina – 9.7%
Columbus, Ohio – 9.1%
New Jersey homeowners had the highest property tax bills. They paid an average of $ 9,196 last year.
Connecticut ($ 7,395), New York ($ 6,628), New Hampshire ($ 6,596) and Massachusetts ($ 6,514) round out the top five. Take-out meals? It is not cheap to own a home in the North East.
The states with the smallest average property tax bills last year were Alabama ($ 841), West Virginia ($ 849), Arkansas ($ 1,147), Tennessee ($ 1,202), and Mississippi ($ 1241).
Why property taxes are so much higher
The rising costs of utilities Tata refers to are largely fueled by the COVID-19 pandemic. Maybe you’ve heard of it?
The virus has pushed mortgage rates to levels never seen before, but it has also helped drive up property taxes.
To cover their operating costs, communities depend heavily on taxes paid by businesses. As business revenues decline, so do local government coffers. The pandemic forced some 200,000 US businesses to shut down permanently in the first year of the pandemic, according to a recent Federal Reserve study.
Meanwhile, local government costs – including running public hospitals and cleaning public schools – have jumped last year because of COVID.
With income vaporizing and spending increasing, communities and school districts have had no choice but to find ways to make up the difference. Raising property taxes, as much as it stinks for homeowners, is a relatively simple and effective solution.
If you feel the pinch
If, like so many Americans, you face lingering financial uncertainty due to the pandemic, rising property taxes will hurt even more. But there are steps you can take to strengthen your finances.
One way to potentially save a substantial stack of cash is to refinance your mortgage. Mortgage technology company Black Knight estimates that about 13 million homeowners in the United States could save an average of $ 283 per month by refinancing, now that 30-year mortgage rates are again below 3% on average.
Easing the burden of credit card debt can also help counter the impact of rising property taxes. Consider taking out a debt consolidation loan, which can help you pay off your credit card debt faster.
Higher property taxes or not, it’s always a good time to see if you can lower the cost of your home insurance. Compare the providers when your policy is renewed, as you may be able to get a better deal.
While you are pinching a few pennies, you might not think you can gamble in the stock market. But there is a way to simply invest your “spare currency” in a diversified portfolio that earns real returns.
The economic impact of COVID is far from over, so the situation for your local government could get even uglier. You and your fellow taxpayers may have to pay even more. It is better to start preparing a little extra pillow now.