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By Marni Rose McFall
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Gen Z homeowners have been zapped by a shock in the form of high property taxes, as a recent study from Insurify found that almost 90 percent of them said they had underestimated the costs of ownership.
Why It Matters
Property taxes have risen consistently over the past five years, with property tax bills rising in nearly every U.S. metropolitan area, according to a recent report from real estate brokerage Redfin. In this five-year period, property taxes increased by almost 30 percent, reaching a monthly median of $250.
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What To Know
Insurify's study found that more than one in three (35 percent) Gen Zers said that they regretted buying their home. Central to this was unexpected costs, as 89 percent said they had been surprised by the high costs of ownership, either after or during the purchase process.
Property taxes topped the list of underestimated expenses, with 40 percent saying they'd underestimated them, while 35 percent said the same for the cost of home insurance and 32 percent said the same for the price tag of home mortgage interest.
"Gen Zers have entered the housing market at a challenging time," Insurify data journalist Matt Brannon told Newsweek. "Mortgage rates are a long way from what they were in 2021 and home prices remain high. Now Gen Z must navigate the market facing near-unattainable home prices, limited savings, and student debt. These challenges make a down payment feel out of reach."
Brannon added, "Even if potential buyers know about property taxes and home insurance premiums, they can easily underestimate how much they'll cost — adding hundreds of dollars to what would otherwise be an affordable mortgage payment. In areas with high taxes, some potential buyers will delay their home purchase or look farther away from urban centers."
A February report from personal finance website WalletHub listed property taxes by state, noting that the average U.S. household spends $2,969 on them annually.
Newsweek has mapped out the rankings from the report below.
Newsweek spoke to Susan Wachter, Albert Sussman professor of real estate and finance as well as co-director at the Penn Institute for Urban Research, about high property taxes. In a phone call, she said that "Higher housing prices are well expected at this point. However, property taxes are not. They're more in the background."
She pointed to common mortgages and the 30-year fixed mortgage rate in the U.S.: "That's one of the most, that's the most important feature of the American housing and finance system. And it's been very salient for the stability of homeownership. What does continue to challenge affordability and increase over time in today's market is property taxes. That's unexpected, because it's not a component of housing costs that is frequently spoken about, or that's in the news."
In identifying the states with the highest and lowest property taxes, WalletHub said, it drew on U.S. Census Bureau data, which compared real-estate property tax rates across all 50 states and the District of Columbia (which ranked 14th). The report's authors divided the "median real estate tax payment" by the "median home price" for each state to calculate real-estate property taxes.
What People Are Saying
Brannon also told Newsweek via email: "At a time when the cost of living is such an overriding concern, some might trade shorter commutes or neighborhood amenities for lower bills. It is crucial to get a clear estimate of those costs up front. If you qualify, check first-time buyer assistance or tax relief programs to keep your payments sustainable."
Wachter also told Newsweek via phone: "An important outcome of the decreasing affordability over time that impacts the ability to become a homeowner, and then after homeownership, can constrain households finances."
What's Next
Wachter told Newsweek that "the old rubric that nothing, everything's uncertain except death and taxes, applies to property taxes."
Brannon added that for now, "Homeownership remains part of the American Dream. But Gen Z and other stakeholders will have to be open to lifestyle changes and policy changes to ensure homeownership is realistic."
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