Property Taxes: The Ongoing Cost That Surprises More Buyers Than Any Other

Property taxes are levied by local governments — counties, municipalities, and school districts — and fund the public services that make communities functional: schools, roads, emergency services, and local government operations. For homeowners, they are a permanent ongoing cost that does not disappear when a mortgage is paid off and, unlike principal and interest, are never fixed.

Effective property tax rates vary dramatically across the United States. New Jersey has the highest average effective rate at approximately 2.2% of assessed value; Hawaii has the lowest at around 0.3%. For a $400,000 home, this difference represents $7,600 per year — or $633 per month — in annual property tax cost. This variation is large enough to shift affordability calculations significantly for buyers comparing markets.