Case Shiller Home Value Index MN vs. MN Property Tax revenue


Post Series on the 5 key areas pushing property values down.

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.

Minnesota Property Tax Collections

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.

Case-Shiller Index Minneapolis, MN

Below the chart indexes the Minnesota Property Tax Collection with the Case-Shiller Index for Minneapolis. 

Case Shiller Index Mpls vs MN Property Tax collections

 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.

Plymouth Sample Property Taxes

South Mpls Sample Property Taxes - SoldsPlymouth/S.Mpls Percent Increase in Taxes 1999-2011

  In South Minneapolis, 2 of the 3 samples had about a 140% increase in taxes.  The Plymouth samples did a little better.
 The Tax values seem to be on par judging by the sold prices.  The mill rate seems to have gone up pushing the taxes up which makes it really difficult to dispute the assessor.
To put this into real terms, we are talking about $200 more per month in South Minneapolis from 1999 to 2011.  You know what $200 per month can do in your own personal budget; help pay for groceries, gas, and utilities.  In terms of financing on a 30 year mortgage, $200 pays for roughly $35,000 in financing on a 30 year mortgage at 5%. (As a seller, that becomes how much less a buyer can pay for your home because that money is now going to taxes.)

Plymouth/S.Mpls Percent Increase in Taxes 1999-2011

Sure, Good Schools is important in the eyes of perspective buyers.  But the next time you vote on school referendums or support property tax increases of any kind – make sure the money is going to count, because the added cost to your taxes is coming off your property value when you go to sell. 
Maybe you can afford to lose that equity, but many people have negative equity as it is now…  So be kind to your neighbors and help keep your property taxes low. 


Filed under Property Value Series

14 responses to “Case Shiller Home Value Index MN vs. MN Property Tax revenue

  1. Craig, excellent post and analysis! High property taxes will keep a cap on home prices making it harder for the market to recover.

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