Bombs, Basis Points, and Breaking Free From Property Taxes

Mortgage interest rates hit a 30-day low, dropping 25 basis points today amid international tensions, while Florida's Governor DeSantis proposes eliminating property taxes on primary residences, which would impact billions in state revenue.

• Interest rates for 30-year fixed mortgages falling to around 6.5%, with volatility expected in coming weeks
• Recommendation to contact clients in purchase agreements about locking in rates during market fluctuations
• DeSantis proposing zero property tax for primary residences in Florida, challenging the concept of true home ownership
• Property tax rate comparison across states: New Jersey highest (1.89%), Hawaii lowest (0.27%)
• Florida collects $50.54 billion annually in property taxes compared to Minnesota's $12.3 billion and Arizona's $8.51 billion
• Significant variations in property taxes between counties affect buyer decisions and monthly payments
And More!!

TIP - If you have buyers currently under contract or considering offers, call them about their rate lock strategy with the expected market volatility this week. Make sure they speak with their lender immediately to determine whether locking in now is their best option.

Chapters

• 0:00 Market Update: Interest Rates Drop
• 3:27 DeSantis' Florida Property Tax Proposal
• 6:18 Property Tax Rates Across States
• 9:38 Tax Collection Comparison: MN, AZ, FL
• 13:17 Buyer Advice and Market Outlook
• 16:16 Final Thoughts and Next Steps

Transcript

Speaker 1: 0:37

Right, everyone, welcome to the Money Market Update. Nikki gave me a little precursor. It's going to be a great call, so grab pen, grab paper.

Speaker 2: 0:46

Yes, lots of info.

Speaker 1: 0:48

Let's go.

Speaker 2: 0:49

All right. So welcome, welcome, welcome. So, interestingly enough, we are seeing a great and awesome boost to mortgage interest rates today as a result of the conflict overseas and the bombing that happened. Not as a direct result of that, but the lack of response from Iran right now is actually helping the markets and everybody's kind of just taking a calm measure on it. We expect to see a lot of volatility this week, but experts are telling us that it's going to start to push down more and more on those mortgage interest rates. So if you take a look at it today, push down more and more on those mortgage interest rates. So if you take a look at it today, we are up by 25 basis points, which means at this level right here you can see mortgage interest rates are the lowest they've been in at least the last 30 days and you can kind of see this downward trend of interest rates Right here indicates about six and a half-ish as far as interest rates go. So we're starting to see that really good push. To have 25 basis points this morning in improvement from when the market opened to now is pretty sizable when you consider some of these smaller adjustments that have happened on the daily. So things are looking really good right now 30-year fixed mortgage interest rates six and a half 6.625 if you want to buy a point down. So things are looking really good from that standpoint. As we see Iran respond to the bombings that the US did on the nuclear facilities, that's when we'll start to see this volatility in the market and we're talking probably a lot of volatility on the daily basis.

Speaker 2: 2:13

So, if you are currently in, have clients who are currently in a purchase agreement or waiting to close or doing whatever, talk to them today. Say, hey, where are you at? Have you locked your interest rate in? Have you talked to your lender about the volatility that's coming in the market in the next week, week and a half? Make sure you're on top of it, make sure you're watching and make sure that you have something that is, you know that you're locked in at an interest rate that you're happy with or that you are completely comfortable floating through the volatility in the market. So, just as a reminder, it's a good service. Call to any clients that you have currently in purchase agreements with closing dates within the next 30 to 60 days. That would be my recommendation today.

Speaker 2: 2:50

All right, so let's talk about on the flip side. Let's talk about property taxes. So DeSantis is really who is the governor in Florida is really starting to push for no property tax in the state of Florida. His argument is that you purchase a home, you pay for it for 30 years and, no matter what, you're still paying property taxes. You don't ever really own that home and the land under it, you're basically just renting it from the government and he really wants to get rid of those property taxes. So what does that mean for Florida? But what does that mean in comparison to the rest of the nation as far as property taxes, how much is collected and what that looks like? So I did a little research on property taxes and which states have the highest percentage of collected property tax, which states have the lowest percentage of collected property taxes. And then I also am going to talk about Minnesota, arizona and Florida in comparison to how much actual revenue is generated on the state level and then on the local level. That's very important because if you think about DeSantis and the governor, you know, having ruling the governor in Florida, is he talking about the state property taxes or is he talking about the local property taxes that he wants to get rid of and there's a distinct difference between the two as far as how much revenue is generated for those. Now he's talking about residential single family primary residences. That's what he wants to get rid of property tax for. I'm going to be talking about property taxes as a whole, for residential property taxes, not corporations, not businesses, not Disney World, not things of that nature that bring in a lot of tax revenue for the state of Florida. But just kind of, how does that compare to everything else? So it's just kind of some interesting information as we kind of follow that decision that he's trying to make and get pushed through the state.

Speaker 2: 4:39

So right now, the top three states with the highest property tax rates and when I say this this is percentage in comparison to home values so number one is New Jersey 1.89% per year of the home's value of the assessed value is given to property taxes. New Hampshire comes in at number two at 1.86. Value is given to property taxes. New Hampshire comes in at number two at 1.86. And, believe it or not, texas comes in at number three at 1.81. Now, interestingly enough, in Texas, historically, the actual cost of your home is lower but your property taxes are much higher. So, for example, just as a comparison, a home that's in Texas that's $400,000, would probably be about $650,000 to $700,000 in the state of Minnesota. So the actual cost of that home is a lot cheaper. But in comparison your property taxes are pretty high.

Speaker 2: 5:29

Higher rankings just in the Midwest area are going to be Nebraska, wisconsin, illinois and Connecticut all around 1.7%. So definitely some Midwest states. They're coming in as far as higher property taxes. On average in the state of Minnesota it's 1.25. In the state of Arizona it's about 0.85. And in Florida it's usually about one-ish right around that amount. Florida is very, very, very diverse from a property tax standpoint because depending on where you are in Florida that you could have a tax rate that's higher or extremely low. So, for example, in and around Disney World in that area, in the Orlando area, those property taxes are actually higher than other parts of the state because they are. Also, even though Disney World's supporting a lot of consumerism around there, they still collect a lot of property taxes for being in that area.

Speaker 2: 6:23

States with the lowest property taxes rates per year Hawaii, believe it or not, 0.27. So expensive homes in Hawaii but you're not paying that much for property taxes. Number two Alabama, 0.39. And then Colorado 0.49 to 0.52, which is also surprising because Colorado, just like Hawaii higher property cost, lower property tax Also coming in at Nevada, louisiana, south Carolina, utah, delaware, west Virginia and Arizona rank among the lowest. So those are all under 0.1 or all under 0.85 as far as property tax rates.

Speaker 2: 7:00

So when I talk about property tax rates I'm talking about what is collected from a local standpoint, either city or county, and also a state level. So those are all combined and then giving you the average percentages of what that is. As far as nationwide goes, the research is a little bit tough to get behind as far as like what the average property tax rate is for a single family home. But they're averaging somewhere around $28.69 per year. So you can kind of see, you know and that has to do with you know what is the average cost of a home, what is it, you know, and there's a lot of data that goes into it. So the accuracy of that $2,700 number, $2,689 number is relatively okay number, a 2689 number is relatively okay. I mean, it's the best guess we can get. But there isn't really a way to calculate averages just because it is so different.

Speaker 2: 7:49

Also, so if we talk about total tax collected. So in the state of Minnesota, for example, across the state collected in 2024 was $12.3 billion in taxes. That was the local level at $11.58 billion and the state level at $0.718 billion. So those two together make up that $12.3 billion. That's what's collected in the state of Minnesota on property tax on a yearly basis and then is divvied out depending on where the assessments are school levies, you know, things of that nature where those things are appropriated. So it's really interesting to think about. So if you think about Minnesota at 12.3, you look at let's see here I want to find it here Arizona, in comparison from 12.3, arizona's 8.51 billion. So drastically lower by about $4 billion, only 716 million going to the state. Otherwise, the 7.8 billion goes to local jurisdictions, counties, cities, schools, things of that nature. So the state does collect a certain portion of that. And as far as Florida goes, florida is going to come in at, believe it or not. So remember, $12 billion for Minnesota, $8.5 billion for Arizona. $50.54 billion is collected every year in the state of Florida for property taxes and this includes the state level getting only $452 million of that. The rest is set out to cities, local jurisdictions, things of that nature.

Speaker 2: 9:26

So if you think about the economic impact if DeSantis is able to get this law passed or this through $50 billion in a hit to their funds, in a hit to their local government or to their like funds. So what the question then becomes is is DeSantis saying there's no state property tax? Or is he saying, hey, you can't rely on local property tax either? So if you think about just the state, that's $452 million. Okay, great, you know, you spread that out, that's a break in your property taxes. But is he going to be able to also say you can't charge from a local level as well, and is that up to him? So that's kind of what we still have to figure out is if that part is actually up to him or if it's going to have to go through each city, each county, each local jurisdiction to say no property tax. So it's really interesting and you sit there and you say, okay. So some of the questions that have been raised how are you going to make up for a $50 billion spend in the state of Florida? And DeSantis is saying that they have a surplus and they can rely on tourism, they can rely on the second homes, they can rely on things of that nature. So that of that $50 billion it's only a certain portion that is for primary residences. They can still rely on people who have investment properties, people who have second homes is they can still rely on people who have investment properties, people who have second homes, and he thinks it's really going to even out and be able to still give them a big surplus in their budget for the year. So it's really interesting to think about when you compare property taxes from state to state and even city to city.

Speaker 2: 10:53

In Minnesota, particularly in the Minneapolis and surrounding areas, there is a huge variation between different counties and what they tax and how they tax. So a good example of this is mortgage registration tax. So Minnesota has mortgage registration tax, which is a collection of tax on any mortgage that is produced in the state. So in other words, if you're buying in Hennepin County and Ramsey County, that mortgage registration tax is actually more expensive than if you buy outside those two counties. So that's just one variation that you can find when we talk about property tax and registration tax and things of those things that come into the mortgage and the property purchase.

Speaker 2: 11:34

So things to think about when you're talking to your buyers is not only, hey, what is this mortgage going to cost me?

Speaker 2: 11:39

But if I buy in, you know, x county up here versus X county over here, what's the difference in my monthly payment per month?

Speaker 2: 11:45

What am I seeing on average for property taxes over here? What am I seeing here? Another good thing to do would be to look up and you can use this, you can do this by using chat, tpt or any of your other AI bots is to say, okay, what have been the average property tax increase percentages year over year for the last five years? That's important, especially for a first-time home buyer where, although their mortgage payment, their principal and interest is going to stay steady throughout the whole time. It'd be important for them to know how have taxes gone up in the last three to five years so that they can understand what's going to affect their mortgage payment in the future. So just some things to think about. Not only is it interesting to talk about which places have lower property tax what's going to be happening in Florida but how does that affect your buyers in the competition and in choosing which home they want to buy and where they want to buy?

Speaker 1: 12:38

Oh my gosh. Yes, so so much good information and I love it because, again, it's this holistic view. And so now when you're talking with your buyers and Nikki can help you with this, like I'm in Minnesota, I know the difference between Hennepin and Wright and Ramsey and all of it, but do I have that conversation at a high level, even though I know they only want to be five minutes from work and it's right there. Maybe in Hennepin County it's going to be higher. Peel back the blinders and at least let them know that it'll put you as the expert. Maybe not many agents are coming to them, are talking about that.

Speaker 1: 13:18

These are great talking points for social media. I mean all of it. So really, really think about that is just providing and adding extra value. And, nikki, this was, yeah, just like you said, jam packed, amazing. Yeah. When you said the 50.5 for a billion, I was like Whoa, but think about it. So if you were to like take the piece of the pie of what's actual primary residential versus everything else, that makes a little bit more sense.

Speaker 2: 13:48

But it does. Yeah, it does, but if you think about it, I mean, that amount of tax collection is drastically more than Minnesota and Arizona even combined, and so if you think about that, that's a huge budget. So it'll be interesting to see how that kind of unfolds in Florida and to see, like, let's say it works in Florida, let's say they do it and it works and everything's great. Will there be other states that will tend to follow after that?

Speaker 1: 14:22

Right in the middle. So we'll just watch and see what happens. But that's why anyone watching this on YouTube, listening on the podcast on workplace, you got to get here, because Nikki will keep us up to date of everything that's happening with with Iran and with Florida and with this stuff. So you bring stuff that you know I'm not always seeing in the media or the way that you come about it. It's just so important for agents to be in the know, especially now more than ever with so much uncertainty and just not knowing what you don't know. I love your peace of mind, I love your consistency and how you show up and bring us so what now? What? What can we do? What is coming? This happened now that so appreciate you so so much, absolutely.

Speaker 2: 15:05

And just a reminder call your buyers. If you have buyers that are currently under contract or coming in under contract, call them and talk to them about have you locked in. Talk to your lender. There's going to be a lot of volatility this week. Lock in if you can Do what you feel comfortable. Have the conversation. Lock in if you can do what you feel comfortable. Have the conversation. Those are important value pieces for anyone that's in the market right now that is floating an interest rate or is looking at purchasing or even has an offer out there. Hey, when we get this offer signed, make sure you check with your lender right away to see if it's a good idea to lock in.

Speaker 1: 15:34

Yeah, what would you say about buyers that are on the fence, that now are like no?

Speaker 2: 15:41

It depends on their reasoning for being on the fence. I mean, I've said this time and time again no matter what market we're in, people need to transact. So we're focusing on those that need to, not necessarily those that want to, and so people that need to transact, they're going to transact. The people that are on the fence and are saying maybe now is not the right time, they're going to hold off for another six months, off, for another six months, I would imagine. Okay, say, until they find the right one, or they're going to slow roll it and then, once they find the right property, then they're going to be more apt to transact in that capacity.

Speaker 2: 16:09

I do have people that have been on the fence for about a little over a year now, I think I've. You know, in the last week it's been really weird because I've gotten contacted by four to five people that were on the fence for quite some time and then are coming around and saying, hey, I just found this property. Hey, I just found this property, and kind of wanting to to put together some options and even make offers, which is different from what I've been seeing in the past two to three months.

Speaker 1: 16:30

Makes sense. Yeah, and, like you said, pull up your phone. I love when you pull up your phone and you show. You show the little check marks. Yeah, it's, it's, take advantage of it, let's get this done. So, no, thank you so much. Appreciate it, absolutely Good, all right. Well, next week it'll be you and Carrie. I will not be on the call, but we will still be having it and I'll be watching. Or, if I can't get it live because I'll be on a plane, I will definitely watch the replay. Thank you so much. I'll drop Nikki's information in the comments. Reach out to her or I. If you need help at all, we're here and happy to help. And yeah, till next time.

Speaker 1: 17:06

Have a great one Great, you too. Bye-bye.