In news that seems likely to send even more Illinois residents running for the exits, a new study indicates that while state home values are falling, property taxes continue to rise.
While most homeowners would expect their property taxes to fall as one of the few silver linings to losing home value, in Illinois, the reverse action seems to be trending. According to a new study released by “taxpayer advocacy group” Taxpayers United of America, government pensions are the culprit. In areas like Rock Island, Illinois, the only way the city government can pay large pensions worth millions of dollars is to keep hiking property taxes, the group said.
The state of Illinois and the Chicago area, in particular, have bucked the national trend of economic recovery in recent years, particularly when it comes to the housing market. According to the National Association of Realtors (NAR), both the Chicago metro area and Illinois as a whole have “severely underperformed” compared to the rest of the country. In fact, during the second quarter of 2019, Chicago home sales fell by 13.3 percent. To make matters worse, Chicago homes are worth about 30 percent less (when adjusted for inflation) than they were in the immediate wake of the housing crash. The property taxes, however, are up a solid 20 percent. In fact, in some areas of the Chicago metro area, property taxes have grown at a rate nearly five times the rate of annual income has grown.
“Well, they must have a great network of public services at least,” you might be thinking. Again, not so much. Less than 50 cents of each dollar in Illinois property taxes go toward “core services” for communities. In fact, in Cook County, where Chicago is located, 77 cents of every dollar that is earmarked for local police and fire services goes to government pensions instead. The situation is untenable for residents, who are leaving the state in droves and leaving unpaid property taxes behind them.
Illinois property taxes and auctions
After hearing all that, you might be wondering why in the world Strategic participates in property tax auctions in Illinois.
After all, does anyone still want to live there? Well, the answer is simple: Yes, people still want to live there. Perhaps even more importantly, people still have to live there. Chicago is a major metropolitan area and the state of Illinois is a central state for a number of important industry sectors. The state is not going to empty out! Even more importantly, tax auctions are a great way to obtain properties for pennies on the dollar, which makes the falling property values less of an issue.
As longtime investors in Illinois, we, at SPI, know where and where not to buy. There are areas of the state that a new investor might not realize are money pits but that we know well to avoid. There are also in-demand areas where values are rising and where Illinois residents know there are good schools and good public services. Snagging deals in those areas via tax auction is a competitive process, but one we are well-versed in accomplishing.