Do real estate taxes lower the value of homes like high interest?

Question

Folks on this site talk about how home values went up (in part) because interests rates have been so low over the last decade. This was stated because lower interest means folks can afford a higher payment and it is not home price, but ulitmately the payment that gauges affordablitiy.

I am not sure how it has been elsewhere, but in my town our taxes (in real $) have doubled in the last 3-4 years, with no change in services and a crappy school system. I know that fuel has gone up and some folks got raises, but they have doubled!

Does this increase in taxes (in my case about $3000) not decrease the amount that the next buyer can afford each month and therefore reduce the market value of your home?

Our taxes are town based (northeast typical) and go up every year.

Real estate is must compete between towns not just within it.

I have a 3 yr. ARM that recently jumped - increased my payment by about $250. That is the same order of magnitude of the tax increase per month.

Our tax rate is about 1.2% locally I have seen them between 1-2%.

Answer 1

no it doesn't. The market is rising in your area or the county has just raised taxes to cover increased expenses. Only an appraisal will give you fair market value. Most counties re-appraise about every 3-5 years

Answer 2

Yes, it can. But I think it would be a small effect. Did your taxes go up by $3000. That is a lot.

I don't have any statistics to back this up, but my rough guess is that taxes on a $200,000 house are normally about $3000 per year. If they go up 10 percent, that's a $300 gain. If you have a 150,000 mortgage and interest rates go up 1 percent, that's $1500 more per year the next buyer would have to pay. So it just seems to me that the interest rates have a much bigger effect than the taxes.

Besides, people have this attitude that "all the tax rates in the town should be about the same percent of value", so it doesn't really effect your house's value relative to other houses in your town. If someone has a job in your town, and needs a house there, then tax rates aren't a big factor in their choice of a home.

Answer 3

High taxes absolutely have a depressing effect on home values. Not just because the higher the tax, the less money you have toward a fixed affordable monthly payment, but high taxes drive people away, making housing in those areas less desirable. The first rule in real estate is location, location, location, and if people don't like the location, for whatever reason, values will be lower.

My house, if it were in many parts of the country, would be worth twice what it is, or more, but because I am in New York state and pay close to the highest property tax in the country per $1,000 of assessed valuation, people and jobs are leaving.

Answer 4

Indirectly, yes it can since the more you spend on taxes, the less you have to spend on the mortgage itself.

For example. Where I live, there are county taxes and in some areas, there is also a city tax. The county tax is .8% of the value; and the city tax is .7% of the value.

If a house sells for $400,000, which is the low average here, then by purchasing in the city, it would cost you 233 more a month. If you purchased outside the city and put the extra 233 towards your payment, you could afford $45,000 more house - for the same payment.

Answer 5

yes, north attleboro, ma has its own revenue generator, a power plant, which infuses the tax base with lower rates. the values and appeal in that town rule over neighbors.