Property tax revenue jumped 11.6% annually at the end of the third quarter, as surging home values earlier this decade added to state and local coffers, according to the National Association of Home Builders.
The amount collected by state and local authorities totaled $757 billion at the end of September 2023. Since early 2022, the growth rate of property tax revenue on a trailing four-quarter basis has risen almost seven times higher from 1.7%, NAHB said.
Per the analysis, third quarter taxes amounted to a nonseasonably adjusted $129 billion, down 2.3% from $132 billion three months earlier. The annual rate of growth at the end of the quarter, though, increased from 11.3% in the previous analysis.
“Gains have been driven by rising home value assessments, which can lag market prices by one to two years,” said David Logan, director of tax and trade analysis at NAHB, which analyzes U.S. Census Bureau state and local tax data in its research.
The trend has borne itself out largely as might be expected, after home prices accelerated by record levels during the Covid pandemic. In the yearly period between the third quarters of 2021 and 2022, home prices grew by at 12.1%, according to the Federal Housing Finance Agency. In that same time frame of 2020-2021, property values spiked by an even higher 18.4%, with the growth corresponding to the rise seen in property tax assessments today.
By comparison, home values between the third quarters of 2022 and 2023 came in higher by a more muted 5.5%, the FHFA said earlier this year.
Housing researchers are coming out with more tempered price expectations for 2024, although wide variations are likely from market to market. Some areas are even forecast to see prices depreciate in the next 12 months.
The share of property taxes relative to the overall amount levied and collected by state and local jurisdictions came in at 37.9% nationwide, up from 37.7% in the prior quarter. The slight growth resulted from higher property tax receipts, combined with decreasing individual and corporate amounts collected. Compared to one year ago, the slice of property tax revenue for state and local governments was more than 4% lower, at 33.8%.
“Property tax collections have proven relatively stable, reflecting the long-run stability of tangible property values as well as the effects of lagging assessments and annual adjustments,” Logan said.
By comparison non-property tax bases, including individual, corporate and sales are more likely to fluctuate based on the state of the economy and consumer sentiment, he noted.
