Purchasing a home typically represents the pinnacle of achieving long-term financial stability.
However, most homeowners tend to grossly underestimate the overall true cost of being a homeowner. In addition to the monthly mortgage payment, homeowners are required to cover additional costs that include property taxes, insurance, utilities, and routine maintenance, which may increase a homeowner's annual expenses by as much as tens of thousands of dollars. The costs associated with owning a home can vary greatly depending on where you live; in fact, in certain metropolitan areas, these costs can be greater than what a family pays in rent each month.
In order to identify the true financial burdens of owning a home in the United States' major cities, PropFusion researched the total annual costs for the 50 most populous U.S. cities. The research incorporated average home prices from Zillow and local property tax rates from the Lincoln Institute, homeowners' insurance costs from NerdWallet, and utility costs from Doxo Insights. A ranking system based on total annual costs for each city was developed and included property taxes, insurance, utilities, energy, and a typical 2 percent home maintenance allowance.
Key Findings
- The median homeowner in America's largest cities pays $20,403 annually in hidden costs beyond their mortgage, including property taxes, insurance, utilities, and maintenance.
- San Jose, California, leads the nation with the highest annual homeownership costs at $54,562, driven by sky-high property values and maintenance expenses.
- Philadelphia, Pennsylvania, offers the most affordable homeownership at $14,284 annually, making it 74% less expensive than San Jose.
- California cities dominate the top tier, claiming 6 of the 10 most expensive cities for homeowners, while Midwest cities like Detroit, Indianapolis, and Columbus rank among the most affordable.
- Home maintenance costs represent the single largest hidden expense for homeowners at a median of $7,785 annually, accounting for 37.71% of all hidden costs, more than property taxes, insurance, and utilities individually.
Read more: https://www.propfusion.com/research/true-cost-of-homeownership-index
Insurance, utilities, taxes - those aren't hidden costs. You also pay them for rental places.
Maintenance, sure, I guess. Maybe unexpected is a better term for that.
Also insurance and taxes are usually part of mortgage calculators.
Utilities aren’t hidden, but I think can be unexpected as well if moving from apartment to single family, especially with a yard, potentially larger space requires more energy for heating and cooling
Lenders refer to it as PITI (Principle, Interest, Taxes, Insurance) and it's included on all mortgage disclosures now. Not so hidden unless you truly have no idea what you're doing.
yup. And who doesn't know you have to pay for utilities?
the 1 bed 1 bath 700 sqft apartment my wife and i rented before we bought our house is currently $100 cheaper than our mortgage.
we have a 5 bed 3 bath house.
$100 cheaper. I also have a 15 year mortgage so a majority of my payment is paid to myself anyway.
They are assuming 2% maintenance and then calling out maintenance costs as a large hidden expense. This is such a big analysis flaw I would ignore the whole thing.
They didn't actually analyze the variability in maintenance across geographies. So, not accounting for age of the housing stock, climate features that would change maintenance costs (snow removal? lawn care? hurricane window installation? Gutter maintenance?.. I'm just making things up here....), variability of the amount and costs of exterior landscaping, or any other real variability in maintenance requirements or maintenance costs in different locations.
That expense ends up dominating some "estimates". But the vast range (>20x) of median home values is a lot higher than the range in maintenance. That $75,000 house in Detroit is going to take a lot of repair!
so, basically there are no hidden expenses...contrary to what this title says
Since most of those expenses are tied to the value of the property, it is not surprising that places with high real estate costs have high 'cost of ownership'. I think their estimate of 2% in maintenance every year is high.
Shhhh, don't tell people about Philly!