Death and taxes may be the only two certainties in life, but the sharp rise in home prices over the COVID era has led to
The average tax on single-family homes in the U.S.
Take for example borrowers around D.C.-Maryland-Virginia, specifically those living in rural areas within that region. The rate of appealing the appraised values of homes rose exponentially in 2023. Maryland counties like Dorchester, Somerset, and Garrett saw increases in the percentage of appraisals appealed of 987%, 827% and 454%, respectively in 2023 compared to 2022, per an analysis by National Mortgage News.
The mortgage industry may be largely in the dark about the process, which could save homeowners potentially thousands of dollars a year.
Spikes in property taxes are "a much bigger issue in rural parts of Maryland compared to suburban areas," according to Alex Naumovych, Maryland-based loan officer at Draper and Kramer Mortgage Corporation.
"In rural areas where some people might be making $30,000 per year, paying $40 more monthly because your property taxes increased can make a difference on whether you fill your gas tank or not," he said.
While borrowers generally prioritize
Homeowners who challenge property assessments rarely prevail, some professionals who offer appeal services say. But the increase in these appeals may point to the fact that homeowners are starting to feel the pinch of
National trends
Property taxes increased in two-thirds of the U.S. last year, in 144 of the 223 metro areas analyzed by Attom. This, Rob Barber, CEO of the data vendor, said was a "key trend from the 2022 data."
Specifically, Attom's report found the majority of areas with property tax spikes were in the South and West regions, where the average tax across all metros rose 5.8% and 5.5% respectively.
"While tax growth was modest by historic measures in 2022, total single-family-home property taxes rose more than twice as fast as they did in 2021," Barber said in a written statement. "At the same time, the average single-family tax bill around the country increased last year at close to twice the pace of the prior year that showed the pressures of inflation, rising costs and the possible loss of commercial tax bases – all forces likely to continue through 2023."
Meanwhile, there are historically huge disparities in property tax rates across the country. In some areas, mainly in the Northeast, homeowners are dishing out close to $10,000 in property taxes.
New Jersey's average property tax was $9,527 in 2022, more than 10 times the average of $928 in West Virginia. The average property tax in Connecticut was $7,671, while in New York, the medium single-family-home property tax was $6,673, Attom's report said.
"Average tax bills remain far higher in the Northeast than anywhere in the country. That raises the costs of living in what are already some of the most expensive parts of the U.S," Barber added. "It also adds a significant factor in the decision-making process of home buyers, sometimes making it harder for sellers to sell."
D.C.-Maryland-Virginia trends
Data provided by counties in Maryland, Virginia and Washington D.C. show that as home prices rose during the pandemic, the rate of appeals specifically in rural areas of the DMV skyrocketed, an analysis by National Mortgage News found.
Maryland classifies 18 out of its 24 jurisdictions as rural, the majority of which saw elevated property tax appeals in 2023 compared to the year prior.
For example, Allegany County saw a 173% spike in appraisal appeals, Dorchester was up 987% and Somerset had a 827% rate of property appeals in 2023 compared to 2022.
Concurrently, average home prices rose in Dorchester to $230,000 at the beginning of 2023, up from about $180,000 in 2021, per an analysis of Zillow data. Meanwhile in Garrett County, the average home price for a single-family home came in at $300,000, up from around an $180,000 average in 2021.
Julie Stevens, who runs a Maryland-based brokerage shop Shore Living Real Estate, said during the
"It definitely does hurt the local people and it hurts the first time homebuyers who have grown up here and who want to stay here," she said. "They're the ones that have the troubles because now they're competing with buyers from out of state that come in and say, 'oh my gosh, it's so affordable here compared to where we are' and it drives up the prices and the property taxes."
Sharon Spedden, who also runs a brokerage firm in Maryland, noted that property taxes going up is "definitely a concern for people because house values have increased so substantially that your assessed value is going to increase, and so, mortgage payments go up."
The analysis contained data from only two counties in Virginia, Fairfax County and densely populated Arlington County. Of the two, Fairfax County, which is labeled as a suburb, with urban and rural pockets, saw appeals rise, too. Compared to 2022, appraisal appeals increased by 1536%.
Manavi Boeser, real estate agent at Virginia-based CENTURY 21 Redwood Realty, said that property tax increases impact those who have lived in the area for decades. Meanwhile, first-time home buyers typically aren't concerned about taxes, but more so with their monthly mortgage payments.
"[Local homeowners] are not really seeing the positives of home values going up because they're not selling their homes, so they're not cashing out that equity and all they're seeing is that their taxes are going up," she said. Boeser also noted those living in rural areas of Fairfax and the county over, Loudoun, "might be less reliant on jobs in the city, so they're probably not seeing an increase in their wages at the rate of folks in the city."
By comparison, areas that are considered suburban, such as Montgomery County, the most populous county in Maryland, had a 66% increased rate of appeals, while Prince George's County, the second most populous county in the state, had a 7% drop of homeowners appealing the state appraisal in 2023.
Data provided by the Washington D.C. government showed a similar pattern of very low property appeal activity. It dropped by 23% from 2022 to 2023.
For homeowners in more suburban areas "a rise in property taxes is honestly not a huge problem" because people in these counties on average have a bigger income than in rural areas, added Naumovych.
Relief options
Though the activity of appealing local government property appraisals is proliferating in some parts of the country, the success rate of such a challenge is rare, according to Michael Campbell, attorney at Maryland-based firm Miller, Miller & Canby.
"Property values have increased and the assessors are watching the sales and noticing that, so they take advantage of the increase in sales prices to increase the assessments and we're challenging a few of those," Campbell said. "Trouble is when people call I'll also do some research and look at comparable sales and when sale prices have increased like they did in the latter half of the pandemic, sometimes there's just no basis to appeal it."
Campbell noted that the number of inquiries he's received to challenge a property value in a DMV area has close to doubled in the past year.
Rory Coakley, who runs firm Coakley Realty, which offers property tax appeal services, said requests for appeals have increased by at least 20% from pre- pandemic times, but that only a small handful of said requests "have merit" and stand a chance of winning.
Coakley added that homeowners are "hyper-alert about rising prices and inflation" and that's likely why there's an increased demand for appealing their taxes. Elevated home values and property taxes ultimately result in people "qualifying for less, which means that they can't buy as much home as they would necessarily like," he added.
Concerns over rising property tax bills have pushed many states to impose caps on the amount of property tax revenue that counties, municipalities, or school districts can collect to fund things like roads, libraries and public schools, per the Center on Budget and Policy Priorities.
These types of taxes now make up close to 35.4% of state and local revenue, according to an analysis by
Some states have opted to provide targeted tax relief to property owners facing unaffordable tax bills. One such option is what the CBPP calls the "circuit breaker program" which
This allows the property tax to continue to fund essential services like education at the local level, while targeting state-financed refunds to those who are in greatest need of assistance, the research and policy institute said.
Around 18 states have circuit breakers, including Maryland, which has a Homeowners' Property Tax Credit Program that limits the amount of property taxes any homeowner must pay based on income.
Apart from state programs that relieve homeowners from paying more on a yearly basis, Spedden added that homeowners who "bought prior to 2020 or even at the beginning of the pandemic have seen enormous wealth building," which can give homeowners the opportunity to tap into their equity or sell their house if they are in financial hardship.
"Homeowners have seen substantial equity increases in their investment and that's the good news," she said. "I haven't seen anybody that's been forced to sell due to taxes at this point…but if somebody chooses to sell in this market, they'll reap the benefits."
