I've been noticing in my area that the huge variation in property taxes from town to town is drastically reducing the potential sale price of certain properties.

If a house is for sale for 180k (that would have sold for that in 180 in 2007) and the property taxes are 3600 (300/mo), that's not so bad, but when the market and other conditions force the saleable price down to 140k, people in that price range aren't willing to pay that much in taxes.  This forces the sale price down even lower.

If your taxes are $1200 more, that means you can afford 20k less in house. 

Since taxes were increased after the Real Estate boom, this also put home owners in a predicament.  Many had purchased the max they could afford, then their property taxes went up $50-100/ month. 

Just a small piece of the puzzle... but property taxes contribute to the decline in the real estate market, along with the other factors. 

Of course, the cities had the larges increase in taxes, which could be why it appears that sale prices in the cities have fallen faster than rural locations.