What Are The Hidden Expenses Of Owning A Home? (& What It Means For The Future Of Homeownership)

Owning a home might be considered the American dream, but it's a dream that's out of reach for many, thanks to skyrocketing costs associated with homeownership. From all the extra expenses that can sneak up on you when buying a home, like closing and inspection costs, to ongoing costs, such as property taxes, homeowner's insurance, and maintenance, being a homeowner means more than just making a mortgage payment. If you're a prospective homebuyer, that doesn't mean you should give up on your dream of buying a house. Instead, you need to be aware of the true cost of homeownership so you can plan and adjust your budget accordingly.

According to a recent analysis by Thumbtack and Zillow, the hidden costs of owning a home have surpassed the increases in household income, at a whopping $15,979 per year. This breaks down to $3,030 in property tax, $2,003 in homeowners' insurance, and $10,946 in maintenance. Coastal markets, like those in New York City, San Francisco, and Boston, face even higher hidden costs, exceeding $20,000 per year.

Unfortunately, the hidden costs of homeownership — property taxes, homeowners' insurance, and maintenance — can't be ignored. The good news is that many mortgage companies offer escrow accounts that bundle your property taxes and homeowners' insurance into your monthly mortgage payment. Your lender then pays those bills when due. This setup prevents you from having to make large, lump-sum payments and ensures these expenses are covered (as long as you make your mortgage payment). The bad news? Property taxes and homeowners' insurance can increase at any time, raising your monthly payment without warning. In fact, insurance premiums have increased by an average of 48% since 2020, leaving many homeowners feeling the squeeze.

While you can generally budget for taxes and insurance, home maintenance is the cost that catches many homeowners off guard. Routine maintenance and repairs of appliances, HVAC systems, plumbing, the roof, gutters, or even meeting lawn care needs can be expensive, and these costs add up fast. There's a lot that can go wrong in a home, and skipping necessary repairs and upkeep tasks may only exacerbate problems and void warranties, leading to even greater expenses later on. 

If you're a current homeowner, you're probably feeling the pressure between rising costs of property taxes and insurance, plus the increase in basic home maintenance. Landscaping, plumbing, electrical, and HVAC services are raising their prices across the board, thanks to the rising costs of materials, labor, and insurance for the companies. And if you're still searching for a house, you've likely noticed that prices are still high, requiring a larger down payment than what was required just a few years ago. 

So, what does this mean for the future of homeownership? While it's not entirely out of sight, it's definitely more challenging to obtain than it used to be. For prospective homeowners looking to buy soon, take some steps to prepare yourself for buying a home in the next year. This may mean purchasing a smaller, less expensive house than originally anticipated, and building a buffer to absorb the hidden costs of homeownership.

For current homeowners, aim to stay ahead of rising costs. This may mean tucking more money away into a home-maintenance savings account and tackling maintenance tasks before they turn into expensive repair projects or replacements. You can start with these monthly tasks to maintain your home, such as unclogging drains and cleaning your appliances. It may also be wise to review your homeowner's insurance policy and shop around for better rates if you've recently been met with skyrocketing premiums.