Real Estate Markets Under Pressure: Higher Property Taxes Burden Buyers in the USA

In the Texan real estate markets of Austin, Dallas, Houston, San Antonio, and Fort Worth, property taxes have a significant impact on homeowners' monthly expenses. They account for nearly 20% of the average monthly housing costs, with effective tax rates of 1.6% to 1.8% applied to the estimated home value, according to the real estate platform Redfin. These housing costs include, in addition to property taxes, mortgage interest, insurance, and other expenses. Such burdens are noticeable not only in Texas but also in states like Illinois, New York, and New Jersey. Interestingly, homeowners on Long Island, New York, pay higher average property taxes than their Texan counterparts. However, a rapid growth in these tax burdens is noted in Texas. Unlike in New York and New Jersey, Texas has witnessed a significantly faster increase in property tax bills since 2019. Simultaneously, Florida has gained almost 670,000 new residents and substantial incomes, considerably expanding the tax base. Texas also sees population growth with a corresponding increase in income. Recently released Redfin figures show that even in states without income tax, the tax burden is not to be underestimated. In Florida, rising property prices and associated higher property taxes have deterred many potential buyers, says Elijah de la Campa, a senior economist at Redfin. The analysis comes at a time when the future of property taxes is under scrutiny. North Dakota might become the first state to decide to abolish this tax, possibly leading to a rethinking in other states. Interestingly, states like Tennessee and Nevada, which also do not levy income tax, show significantly lower property tax burdens. For instance, monthly tax bills in Las Vegas have even decreased by 4.3% since 2019. Nashville also stands out with a moderate increase in the tax burden, with the bill of $152 well below the national average. In contrast, Seattle has experienced a significant rise in costs with a 40% increase since 2019, yet still below the burden level of Texas.