July 21, 2014
Property tax bills are on the rise, and their steady climb has been causing stress for the already-troubled mortgage market.
Homeowners face financing challenges
Many individuals are having a hard time obtaining financing as a result of the QM standards set forth by the Consumer Financial Protection Bureau, which require borrowers to have a 43 percent debt-to-income limit, according to American Banker. The growing incidence of high property tax bills is only making their situation more difficult, as it increases applicants' total payments.
Tax collections rise
Across the nation, state and local property tax collections reached $1,434 per capita in 2010, compared to $1,208 in 2006, according to figures provided by the Tax Foundation's Center for State Tax Policy and reported on by the media outlet.
This trend kept up after 2010, as recent U.S. Census Bureau estimates showed that property tax collections totaled $182.8 billion during the last three months of 2013, according to Bloomberg. As a result, these receipts were 3 percent higher on a nationwide basis than during 2012. This increase represented the largest one-year gain since 2009, when these collections increased 9 percent.
Cities thrive as property taxes surge
Many cities - such as Houston, San Jose and Nashville - have either generated record property tax revenue, or have come close to doing so, Bloomberg reported. Local governments have taken advantage of this cash infusion, using it to pay for basic public goods including roads and police officers. Rob Hernandez, deputy administrator of Broward County, Florida, commented on the situation, noting that property tax revenue is on track to increase 7 percent this fiscal year.
"'The money is flowing back, but it's not like an open spigot," he told the news source. "It's trickling in."
Many homeowners remain confused
While cities are benefiting from the rising property taxes, several market experts have emphasized that these increasing costs can throw homeowners for a loop, according to American Banker. While these regular payments are considered in underwriting and loan terms, increases in property taxes are difficult to predict.
"They don't go into a home thinking their property tax is going to increase," Stephen Lewis, president and chief executive of Mansfield, Texas-based counseling agency Making Acceptable Homeowners, told the news source. Lyman Stone, an economist at the Center for State Tax Policy, voiced similar concerns.
"I think first-time homeowners can be very surprised. It's not withheld like your income tax, or on your receipt like a sales tax. You just get a bill," he told the media outlet. "So I think it can be very shocking to first-time homeowners, especially if you are in a somewhat higher tax area."