The Scotsman Guide - Victor Whitman - 14 April 2017
The average American homeowner paid nearly $3,300 in property taxes in 2016, with taxes on single-family homes totaling $277.7 billion, according to a recent study by Attom Data Solutions.
The study analyzed property-tax data at the state, county and metro levels, and used an advanced formula to estimate market values of 84 million single-family homes. It also calculated effective tax rates — the average property tax as a percentage of a home’s market value — in all 50 states and 217 metropolitan areas with populations of at least 200,000.
A separate study from Attom Data Solutions released late last month showed, in general, homes were becoming less affordable. The group’s affordability index sat at its lowest level since late 2008.
“Home affordability continued to worsen in the first quarter, not surprising given the continued strong growth in home prices combined with the recent rise in mortgage rates,” Attom Data Senior Vice President Daren Blomquist said in a news release.
Property taxes may be a burden for homeowners, but on another front many senior citizens are benefiting from increased home equity that may help to offset the sting of taxes.
The National Reverse Mortgage Lenders Association (NRMLA) recently reported that retirement-aged homeowners, those 62 and older, saw their home equity grow by 2.8 percent in the fourth quarter of 2016. That pushed the organization’s reverse-mortgage market index (RMMI) to its highest level since its inception in 2000.
The RMMI has grown considerably in the last three years, rising 9 percent in 2016, 8.6 percent in 2015 and 8 percent in 2014.
“The strong RMMI in the fourth quarter of last year shows that home equity continues to be a valuable asset for homeowners 62 and older,” NRMLA President and CEO Peter Bell said in a news release. “It’s time for consumers to study what it means to have home equity and to learn about its strategic uses, including how it can be used to support retirement goals."
Another recent study through the National Council on Aging (NCOA) concluded that the majority of older homeowners haven’t considered home equity as a means for increasing their retirement security. The NCOA study used feedback from more than 250 financial advisors and more than 1,000 homeowners 60 and older.
The vast majority of respondents cited concerns over rising medical expenses and possibly outliving their retirements, while simultaneously expressing desires to stay in their home as long as possible. But 401(k) accounts, pensions, annuities and savings were mentioned far more often than home equity as retirement assets, despite the fact that home value comprises up to 80 percent of a homeowner’s net worth. And, in general, both consumers and financial advisors didn’t fully understand reverse mortgages or home equity lines of credit (HELOCs).
“For most older people, the use of home equity in a retirement is not a question of if, but when and how,” NCOA CEO Jay Greenberg said in a news release. “We need to do a better job of educating consumers about the products available and how best to use their homes as a strategic asset as they age.”
In Attom’s property-tax analysis, the five states with the highest effective property tax rates were New Jersey (2.31 percent), Illinois (2.13 percent), Texas (2.06 percent), New Hampshire (2.03 percent) and Vermont (2.02 percent). The national average was 1.15 percent, equating to $2,300 on a $200,000 home.
Hawaii (0.32 percent) had the nation’s lowest effective property tax rate, followed by Alabama (0.48 percent), Colorado (0.52 percent), Tennessee (0.54 percent) and Delaware (0.56 percent).
New York had three of the top five metro areas for highest taxes, with Binghamton (3.10 percent) topping the list, Rochester (2.99 percent) second and Syracuse (2.67 percent) fifth. Rockford, Illinois, (2.96 percent) and Atlantic City, New Jersey, (2.77 percent) also ranked in the top five.
At the bottom of list were Honolulu (0.32 percent); Montgomery, Alabama. (0.35 percent); Tuscaloosa, Alabama. (0.36 percent); Florence, South Carolina (0.44 percent); and Colorado Springs, Colorado (0.44 percent).
The study also compared owner-occupied properties with investment properties. The average annual property tax for owner-occupied, single-family homes was $3,658, about 50 percent higher than the $2,437 average for nonowner-occupied investment homes. Investment properties accounted for 26 percent of all single-family homes in the U.S., the report concluded.
In 34 states, the effective tax rate for investment homes was lower than the rate on owner-occupied homes. States in which the reverse was true include Arizona, Florida, Indiana, Michigan and Pennsylvania.