I am not a homeowner right now for many reasons. Here’s another reason to add to the list: sky-high property tax. Yes, I pay some property tax now, hidden out of sight in the amount I pay as rent to reside in my apartment, but owning a home and finding money for property tax is something beyond my reach at the moment.
First-time home buyers are especially running into trouble as wages adjusted for inflation haven’t kept pace with real estate prices… And as real estate prices rise, so do property taxes as a percentage of the assessed value of the house. In some cases, that percentage is going up as well.
This isn’t necessarily a bad thing in general. People who live in an area should pay for the upkeep of schools and services (regardless of whether they are directly affected). The locality has the respobsibility of making sure that money is used wisely.
As property taxes are based on the assessed value of your house, as long as you’re not selling, it’s beneficial to challenge your latest assessment. If you can lower the assessed value, you can pay less property tax.
Appraisals for sale of the house generate another set of problems. In some cases, there are conflicts of interest between appraisers and real estate agents. With a high appraisal, if the house sells, the real estate agent gets a better commission.
As noted in the Miami Herald, it’s also important for buyers to challenge appraisals they believe are too high. If the purchase is finances, the premium paid for an overassessed house can quickly add up to a large amount of wasted money.
It is also speculated that overappraisals have helped fuel the boom or bubble (or “froth” according to Alan Greenspan).
The MSN article, Taxes Soar Along With Home Prices, also includes a handy chart showing the average property tax rate in each state. You can quickly compare what you pay to the percentage others are charged. The averages won’t tell the whole story; any one state could see a wide variation in property tax.
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12:21 pm (reply)
It really is ridiculous. The taxes on my new house are going to be about the same amount per year as someone’s salary (assuming that person was working a minimum wage job, but still….)
5:26 pm (reply)
Property prices, on average, will increase above the inflation.
Yes guys and gals, this means that most properties will appreciate more than inflation on the long term.
Real Estate is a limited assett… you can not make up more land!
11:47 pm (reply)
My home has been appreciating like crazy, and along with that, my taxes have been going up like crazy. While the increased payment sucks, it is nice to book the gains in my net worth calculations. I definitely don’t regret it.
Hazzard
http://elym.blogspot.com
11:54 pm (reply)
Flexo-Property taxes will continue to go higher, so will taxes in general. Imagine the poor person who has their entire “retirement” savings in a tax deferred status-food for thought:make some after tax contributions and take advantage of Roth’s!