Dear Reader,
A cooling housing market should mean relief, right? Not always—because property taxes follow a different clock than home prices.
In the last few weeks, the housing data has clearly softened: the Federal Housing Finance Agency reported that annual home-price gains slowed to 1.7% in October, the smallest year-over-year increase since 2012, according to the latest release from FHFA. But many homeowners are still seeing tax bills and escrow payments move higher anyway.
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Why This Matters
For everyday investors and retirees, this is the “stealth cost” of homeownership: your mortgage rate can be fixed, but your total monthly payment is not.
Property taxes rise for three common reasons:
Assessments lag the market. Many counties reassess on a schedule and use prior sales data. So even if prices flatten today, your assessed value may still reflect last year’s hotter market.
Budgets drive the bill. Local governments set spending first, then collect it through levies. If costs rise—wages, debt service, pensions—tax collections can rise even in a slow housing market.
Tax burdens can shift. When one part of the tax base weakens, another often picks up the slack. A late-December report from the Wall Street Journal described how a changing commercial tax base in Chicago helped push more of the bill onto homeowners—even when the city’s overall take didn’t dramatically change.
Where Things Stand
Housing activity is still constrained by affordability, but the trend is “slower, not stronger.” In mid-December, Reuters noted existing-home sales only edged up in November, with tight inventory keeping prices sticky in many markets. Slower price growth doesn’t automatically translate into lower taxes—especially when assessed values and local budgets adjust with delays.
Then comes the escrow surprise. When your servicer runs its annual escrow analysis, it can raise your monthly payment to cover (a) higher projected taxes/insurance and (b) an escrow shortage from last year. Federal servicing rules allow an escrow cushion (often up to about two months) and generally permit shortages to be repaid over at least 12 months, per the CFPB’s Regulation X.
The Patriot Perspective
In plain terms: treat property taxes like a variable bill, not a fixed footnote.
What to review now: your assessment notice (and appeal deadline), exemptions (homestead, senior, veteran, disability), and your latest escrow statement so you can plan for “non-mortgage” housing costs before they raise your payment for you.
Stay steady,
Kenneth Boyd
Author, Finance Writer, Former Investment Advisor & CPA