If you own real property (real estate) in Minnesota, you are well aware of 2 things: Your property value is falling and your property taxes continue to go up.
I have suspected there was a correlation between the escalating property taxes and deflating property values, but have found it difficult to put together proof. This may not be solid proof because there are other factors at work here, it is however evidence supporting the theory.
To start off, let’s look at the Property Tax Revenue in Minnesota.
The grey bars indicate recessions. There is a dramatic spike between 2002 and 2004 in property tax collections. The housing crash started in 2005-2006. (or inversely, 2005-2006 was the peak of the boom).
Here is the Case-Shiller House Price Index for Minneapolis, MN.
It does not prove the property taxes contributed to the market stall. But it is interesting that there was a huge tax collection spike just before the peak of the market.
What I find most interesting is how the property tax collections continue to climb while the values are dropping.
Correcting that trend would help stabilize the values. Property taxes are not the only thing impacting the values; foreclosures, financing difficulties, and high unemployment are huge negative pressures on values as well. This is just one that no one is talking about lately.
Let’s put this in perspective a bit. I’ve selected some random samples of homes that sold in the last couple weeks. Three in Plymouth and Three in South Minneapolis all between $200,000 and $300,000. Right in the median price bracket of the twin cities.