A recent study reveals that beyond mortgage payments, American homeowners must contend with steadily rising additional housing-related expenses. According to a survey by consumer financial services company Bankrate, American homeowners now pay an average of $18,118 annually for property taxes, homeowners insurance, maintenance, energy, and other housing-related costs. This figure is equivalent to the cost of buying a used car and represents a 26% increase from four years ago, when the average was $14,428, highlighting the significant rise in living costs since the onset of the COVID-19 pandemic.
The report notes that many Americans aspire to homeownership, but skyrocketing home prices and high mortgage rates have made this dream increasingly elusive. Even those who have successfully purchased homes are struggling with the rising maintenance costs. Bankrate data shows that monthly maintenance costs have increased from $1,202 in 2020 to $1,510, driven primarily by surges in maintenance and insurance expenses.
In recent years, homeowners insurance costs have soared, partly due to the increasing frequency of extreme weather events. Jennifer Schaull, a homeowner in Novato, California, reported that her homeowners insurance premium doubled without any prior notice, while some of her neighbors even lost their coverage entirely. She remarked, “My neighbors say I’m lucky because our premium only doubled and wasn’t canceled.”
Internet
According to S&P Global, U.S. homeowners insurance rates rose by 11.3% last year alone. Severe storms, hurricanes, and wildfires caused massive losses, resulting in the insurance industry incurring $103 billion in losses. Additionally, high inflation has significantly increased home rebuilding costs.
Schaull also mentioned a recent discovery that her house needed $10,000 in plumbing repairs. She said, “When we bought the house, the real estate market was very competitive. To secure the purchase, we waived the home inspection and bought it as-is. We knew the plumbing was old, and now it’s deteriorating.”
Schaull is not alone in facing high hidden costs of homeownership in California. Bankrate data indicates that the average cost of owning and maintaining a home in California is $28,790, second only to Hawaii in the nation. Massachusetts, New Jersey, and Connecticut follow with average costs of $26,313, $25,573, and $23,515, respectively.
Internet
In contrast, states like Kentucky, Arkansas, and Mississippi have the lowest hidden costs of homeownership, all just over $10,000. Since the pandemic, Utah, Idaho, and Hawaii have seen the fastest growth in these hidden costs.
On a positive note, home values have risen significantly since 2020, increasing homeowners’ equity. According to Federal Reserve data, the median net worth of Americans, adjusted for inflation, grew by 37% from 2019 to 2022. The real estate boom has also provided homeowners with additional financial flexibility, enabling them to borrow against their home equity to cover unexpected expenses, education costs, or home upgrades.
Bankrate analyst Jeff Ostrowski advises that these findings should be a reality check for first-time homebuyers. “Many first-time buyers think the closing table is the finish line,” he said. “But from another perspective, it’s just the starting point for bearing all these new expenses.”
Ostrowski recommends that buyers must factor these hidden costs of homeownership into their budget when determining how much mortgage they can afford. He emphasizes, “When you have enough for a down payment, you might think you’re done scrimping and saving. But once you own a home, you need to have funds set aside for these unexpected expenses.”
