Property tax bills are another reminder of affordability challenges in the housing market
After years of struggling to find a home in the nearly unattainable California housing market, Caroline began looking for a path to homeownership outside the state. She found a dream solution just outside Phoenix.
The city’s abundant selection of large, new homes, the relatively affordable prices compared to other major cities, and a property tax rate of 0.43% — one of the nation’s lowest — was unbeatable.
That was five years ago. Now the same affordability concerns that Caroline contended with in California seem to be creeping into states that have typically been havens of affordability.
Since 2019, prices in Maricopa County, Arizona, where Phoenix is located, have climbed 64.3%, and property taxes have followed suit.
With every passing year, property tax bills have ticked upward, and now they’re 15.4% more than just before the pandemic. But Phoenix doesn’t even come close to the top the list for U.S. counties that have seen eye-watering increases in property tax bills.
What Can You Expect From the Housing Market in 2025?
Counties in Florida, California, and Texas — three states that are continuing to see people move in and push up housing prices over 40% — have had property taxes rise over 30%.
Across the U.S., property taxes for single-family residential properties are up by 5.1% from 2023, with the median payment ringing up at $3,018. With home price forecasts predicting that prices will rise another 2%-3% to reach record highs in 2025, millions of homeowners are expected to continue to feel the pinch from soaring property taxes.
Higher 2024 Property Taxes Are a Mixed Blessing
Although taxes are one of those life requirements that no one likes, they are a good indicator of the health of a local housing market. When housing prices go up, so too do property taxes. However, how much property taxes increase each year depends on the annual assessments done by cities and counties across the U.S.
Florida has long been a destination for people seeking an alternative to high-tax, high-costs states. But even in this low-cost haven, property taxes are beginning to present a burden for homeowners. In Florida, property taxes have increased by 9.5% per year since 2019, while home prices have shot up by 14.6% annually. By October 2024, the median price for a single-family home in Florida jumped above the national average hitting $393,500.
North Carolina has also seen a boom in property taxes to accompany the rise in the state’s home prices. The state’s property values have outpaced its neighbors, South Carolina and Virginia, growing 13.9% annually. As a result, even with one of the most affordable property tax rates in the nation at 0.79%, median payments in 2024 were $1,750.
Why Did Property Taxes Go up in 2024?
Property taxes rise alongside home prices. While some areas of the country will always be more expensive than others, the national trend toward more expensive properties and greater property tax liabilities is clear. Already, the tax bills climbed an average of 27% from 2019 to 2024. Short of government-led changes, homeowners will continue to contend with rising property taxes year after year.
At the same time, how much property taxes can increase per year depends on where you live. So it pays to consider an area’s property tax burden before buying a home.
However, when looking at property tax trends, you need to look at the local level to see where people are really feeling the squeeze. While Arizona is nowhere near the top of the list for most expensive property taxes — the average increase in payments was only 5.9% since 2019 — the state saw home prices leap by 70% in the same time period. This has significantly ratcheted up tax payments in populous counties like Maricopa County, where the median tax payment is up 15.4%.
Similarly, California is not on the list of states that have seen the largest increases in property tax payments thanks in part to its legislated protections that limit annual property tax increases. Nevertheless, five counties in Southern California made it into the top 15 list of the country’s most populous counties for tax hikes. How much have property taxes increased by year in California? In the five most-populous counties listed in Table 2, property taxes have risen over 5% on average.
Comparing the increase between 2019 and 2024 reveals a more interesting picture. San Bernardino (up 32.7%), Riverside (up 32.3%), Los Angeles (up 29.9%), San Diego (up 29.5%), and Orange (up 25.1%), all saw home price appreciation accelerate at a significantly faster rate than taxes. Since property taxes are reset and realigned with the new acquisition prices under Proposition 13, these variations are likely attributable to variations in the rate of housing turnovers.
Property Taxes Present Another Headwind for Affordability
2024’s property tax bills are another reminder of the housing affordability challenges that face both homeowners and renters alike1.
Still, housing affordability has not stopped people from purchasing homes and further fueling the rising prices and property taxes. With nearly one-third of American households now considered cost burdened, concerns around housing affordability can no longer be ignored.
As discussions around affordability continue to gain steam and making it into presidential addresses and the campaigns of state leaders, 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.
[1] For U.S. homeowners, annual property taxes are a direct, out-of-pocket cost. For renters, these costs are passed down through higher rent prices. For both groups, increasing costs directly impacts budgets.
What Can You Expect From the Housing Market in 2025?
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Written by: Economy Team