Hidden Costs of Homeownership Are Skyrocketing

[neverfstop]

www.wsj.com/economy/housing/housing-affordability-taxes-insurance-costs-rise-bca64df1

ETA: sorry the link now looks like its paywalled, but I could read the whole thing earlier...

Somewhat based on mortgage rates, but the taxes and insurance rates are what's really driving up the true total.... A few of the facts from the article

*Homeownership affordability fell to its lowest level since the 1980s last year as mortgage rates reached a 23-year high and home prices set new records.

*In Manhattan, one of the country’s priciest real-estate markets, typical home values fell 8.9% in February from a year earlier, according to Zillow. But the monthly maintenance fees for recently sold co-ops rose 62% from the first quarter of 2020 to the first quarter of 2024, and condo fees rose 45% in the same period, according to appraisal firm Miller Samuel.

*The average property tax for U.S. single-family homes was $4,062 in 2023, up 4.1% from 2022, according to real-estate data firm Attom. Some major metro areas are contending with much bigger increases. In Charlotte, N.C., the average property tax rose 31.5% from 2022 to 2023. In Indianapolis it was up nearly 19%.


*The average annual home insurance cost rose about 20% between 2021 and 2023 to $2,377, according to insurance-shopping site Insurify, which projects another 6% increase in 2024. It’s likely to be higher than that in several states. Insurify expects average home-insurance costs to rise by more than 10% in eight states this year, including Louisiana, Maine and Michigan.

*In Colorado, the 2021 Marshall Fire that swept through the suburbs between Denver and Boulder is still boosting insurance costs in that state. Insurance broker Michael McCarron said many of his clients’ home-insurance bills are rising 20% to 40% a year.

[AdaraMarie]

I can't read the article but I am feeling this a lot.

[Jalapeñomel]

Apr 12, 2024 8:40:24 GMT -5 AdaraMarie said:

I can't read the article but I am feeling this a lot.

Same. 

[mrsslocombe]

I'm sure this isn't the reasoning for the rest of the country, but I can at least speak for NYC.

Property taxes have risen significantly in the past 10 years because prior to the Deblasio administration, properties were extremely undervalued on tax assessments. The Bloomberg administration in particular was very lenient. So starting with Deblasio, there was an effort to bring tax assessments to their "true" number. My co-op has been phasing in the new tax rates over a 5 year period, the rate went up 40% overall. Granted, my co-op is full of progressives, but the Board has been very clear that the new assessments/rates are fair and in line with what we should be paying.

Also, there was a tax abatement law for new construction that drastically reduced property taxes for the first 35 years. That program is ending finally. It was such a giveaway to the rich. But all those people are now paying much higher rates as their abatements end.

There is still a lot of unfairness in the NYC property tax system-single family/luxury housing in some neighborhoods (like mine) are still vastly undertaxed.

[carmenere]

Me too. We don’t even live in a high risk area, but our homeowners insurance increased 30%. And this year we got hit with a double-whammy of taxes due to new assessments and our city increasing its millage rate for the first time in a decade.

[simpsongal]

I was just thinking to myself as I finished our income taxes and took stock of our budget/expenses, how few of our living expenses are purely mortgage. We're extremely fortunate to have locked in a low rate and we owe a small fraction of what our home is worth. But yikes, the costs are still so high b/c of property taxes, maintenance, utilities, etc...

I haven't seen numbers on the SALT cap impact lately, but I'm guessing as these homeownership numbers tick up it's not just going to be the high cost coastal states that will be complaining about it.

[lilac05]

We’re feeling this, too. We are super lucky to have been able to refinance when rates were stupidly low, but despite being LCOL, our property taxes are high.

@@our state refuses to properly fund schools with state taxes, so our district has been forced to raise property taxes to pay for schools. (Meanwhile, our state had a nearly $2B budget surplus last year and we just passed school vouchers sending a ridiculous amount of money to private schools.)

[konapoppy]

I also can’t read the article, but in addition to the insurance crisis and property tax increases, I think a lot of folks are having to do a lot of maintenance. Newer builds anecdotally seem to be terribly built and require a lot of work from owners, and older homes need maintenance (some of which is driven by our energy crisis). Cost of material and labor is up. What a time to be alive!

[ellipses84]

Natural disasters causing insurance costs to rise is a major reason. Even worse is some houses becoming uninsurable.

It seems like home repair and renovation costs have gone way up in the past decade. At least in my area there’s a lot of houses built in the mid-century that original owners are moving out of and there has not been proper maintenance. Often these are bought by flippers, some that do a shoddy cosmetic job. Either way I know people who’ve bought a house and had significant repair costs.

Rental costs have also skyrocketed and I know several renters in a housing crisis because their landlord decided to sell and they can’t find anything comparable they can afford.

[sakoro]

I bought a 1990 condo two years ago and it’s been a lot more expensive than I expected.
- HOA has gone up $180/ mo due to deferred maintenance. There’s a new law in CA that required inspection on balconies and staircases and our complex has to make repairs. Also, pools have to be resurfaced and the clubhouse needs repairs. Finally they are doing termite treatment in the attics and car ports.
- Because our local electric utility charges the highest rates in the country (SDG&E), I replaced my windows and added ceiling fans to retain cool air in summer. All told, that cost around $10K.
- Appliances fall apart much faster than in the 80s/90s. I have replaced the washer/ dryer and I think the 17 year old fridge is on its last legs. I also need to replace the furnace at some point.
- Taxes and insurance have stayed the same (so far). My homeowners insurance company (State Farm) is no longer taking new customers in CA, but they haven’t kicked me off the rolls. We have a lot of extra local taxes for parks, water treatment facilities and schools.

None of these are the type of repairs you can show off to your friends on social media, just boring stuff that needs to get done.

[jwright]

Literally. My escrow payment to cover insurance and property taxes is greater than my principal and interest payment to actually own my home.

It's really insurance that is the problem here in coastal SC. We had a 80% increase because our original insurer went out of business two years ago and the following year there was "only" a 10% increase.

[leahcar]

My escrows are MORE by almost $400/mo than my principal & interest mortgage payment. My insurance has skyrocketed in the 5 years since we've bought this house. Property taxes have also grown due to increase in value.

We also put in new windows into our 70s house. It has definitely helped our utility bills, but windows are SO expensive.

[pixy0stix]

It's interesting how much "true cost" is starting to figure into a lot of our conversations here. This is what the Boomers have wrought by kicking the can down the road.

Also, hello climate change (re insurance) impacting everyone.

[wawa]

My eyes are bugging out at the idea that escrow is more than P+I for some people. Mine has been steadily creeping up over the years, but it's still under 30% of my total payment. Is this just that i live in a HCOL area and my house was expensive, so as a percentage it isn't that much???

The boomers saddling everybody in a condo or an HOA with a lot of amenentities with some crazy bills is so real though. There's a LOT of deferred maintenance out there and with laws passing in a lot of places requiring actual assessments and plans to catch it all up it's $$$$$.

[heygrey]

I am expecting our homeowners insurance to increase by 30% based on friends and neighbours. I renewed last year on August 11, just days before the McDougall Creek wildfire burned 200 homes in our city and surrounding areas. Everyone local who has renewed since then has seen a 30% jump.

The other hidden expense we're experiencing is the cost of hiring any sort of maintenance or renovations. There is such a shortage of trades here (because they are all rebuilding the aforementioned houses that burned) that the prices quoted for simple home repairs are insanely high. H and I have gotten a lot deeper into DIY than we ever expected because we can't/won't pay for the quotes we're getting.

[pixy0stix]

Apr 12, 2024 15:44:48 GMT -5 wawa said:

The boomers saddling everybody in a condo or an HOA with a lot of amenentities with some crazy bills is so real though. There's a LOT of deferred maintenance out there and with laws passing in a lot of places requiring actual assessments and plans to catch it all up it's $$$$$.

When I left the city, they were dealing with 2 HOAs that hadn't maintained their private roads that wanted to make them public because they couldn't handle the cost of maintenance. Unfortunately for them, the roads weren't built to code (hence why they were private), so they were having to bring them up to existing code before they could be made public. The neighborhood was being made into a special district because the cost was millions of dollars.

[kershnic]

Apr 12, 2024 15:44:48 GMT -5 wawa said:

My eyes are bugging out at the idea that escrow is more than P+I for some people. Mine has been steadily creeping up over the years, but it's still under 30% of my total payment. Is this just that i live in a HCOL area and my house was expensive, so as a percentage it isn't that much???

Mine has been escrow higher since we bought 5 years ago, and escrow has continued to increase while P+I has decreased due to refinancing at a lower interest rate.  I live in a LCOL/low real estate cost area, with relatively high taxes.

[meganew]

Add me to the list of escrow being higher than my principal payment. Our taxes were raised significantly- which I honestly don’t have a huge issue with, considering houses in Philly have been undervalued for years- but since those numbers were taken into account for last years payments, we’re now putting in double for each month to make up for the discrepancy. Meanwhile we still have million dollar new construction being sold with 10 year tax abatements.

[jwright]

Apr 12, 2024 15:44:48 GMT -5 wawa said:

My eyes are bugging out at the idea that escrow is more than P+I for some people. Mine has been steadily creeping up over the years, but it's still under 30% of my total payment. Is this just that i live in a HCOL area and my house was expensive, so as a percentage it isn't that much???

The boomers saddling everybody in a condo or an HOA with a lot of amenentities with some crazy bills is so real though. There's a LOT of deferred maintenance out there and with laws passing in a lot of places requiring actual assessments and plans to catch it all up it's $$$$$.

I think it's a combination of low interest rates and skyrocketing insurance costs for me.  Our insurance is about $9k per year; I can't imagine what people are paying in Florida. 

[jlt19]

Wow, seeing all of this and being about 60/40 on P&I/T&I really puts into perspective how people still lose their homes after they’re paid off.

And then add in HOA’s. Ours is high for a house, but they keep building so I’m not overly concerned about it at this point. But condos are crazy high, especially when all I hear is the lack of maintenance actually being done. I was considering a “villa”, but that extra $300-$400/month is the same money I’d save on P&I.

Renting sounds more and more appealing, even at high prices.

[Bernadine]

Propane is what’s killing us. It’s going to be over $6000 this year, and it makes me want to cry.

[loira]

I think escrow must be something different in the US (I tried to google but didn't really understand). I pay an additional amount to my lender to cover property taxes, and they put this in an escrow account I think, but there is no way that amount is more than my mortgage payment itself. But it doesn't really matter because the cost of housing in Canada has gotten so ridiculous that most people can't even afford the house in the first place. The average income needed to buy a home in my city is around $170k. Most 2 income households do not bring in that much because salaries here aren't very high.

My condo could use a bit of a refresh but I can't afford it because even though I bought this place 4 years ago and my salary has probably risen $15k since, the cost of living is now insane and I have virtually no disposable income.

[pierogigirl]

loira Escrow is an account for your property taxes and sometimes insurance in the US too.

We pay ours ourselves, but my property taxes and insurance are about the same as my mortgage and have been since we bought the house (and of course, are going up every year). I live in MCOL - my house was a good price in a high tax state. I also don't live in an area prone to flooding or wildfires, so my insurance has not gone up as much as others.

[sent]

Our already very high property taxes will be going up by a higher amount that expected. Although the Board of Education can only increase their budget by a modest percent set by state law, they can apply for an appeal to that law to increase the budget to pay for health insurance for teachers because premium increases outpace the increase from the modest percentage law. A Board of Ed member recently mentioned that this year there is a higher increase in premiums than anticipated. What a loophole! The health insurance industry doesn't appear to be suffering financial damage based on their sky high stock prices. Yet insurance premiums never go down. Why should they even try to decrease premiums when we keep on increasing what we pay for it, either directly through our paychecks for ourselves and indirectly through our taxes for our civil servants.

I don't think our town knows that this is one of the big reasons behind why our property taxes increase. This extra money isn't even going to the schools and it's not necessary going to healthcare either as the recent NY Times article showed.

No shade to teachers, they deserve the best but this whole awful private insurance system needs a major shakedown.

[loira]

pierogigirl ah okay! Yes, I imagine insurance adds quite a bit to it, particularly in earthquake/tsunami/flood/fire zones. I have a condo so only pay contents insurance (building insurance is paid for through the strata though of course I have strata fees also).

[basilosaurus]

Apr 13, 2024 19:32:37 GMT -5 loira said:

pierogigirl ah okay! Yes, I imagine insurance adds quite a bit to it, particularly in earthquake/tsunami/flood/fire zones. I have a condo so only pay contents insurance (building insurance is paid for through the strata though of course I have strata fees also).

those zones are arguably all of the country especially if you add in tornado and hurricane. And don't forget chiller blasts in places like Texas that collapse infrastructure and roofs.

[krystee]

Our property taxes are $11,000 on a home under $500K. It’s brutal.

Our paver patio is sinking requiring at least a $4K fix. Our basement has mold, which adds several more thousands (it was in a hidden area we didn’t see and we are going to redo the entire drywall plus fix whatever is causing it. How does the average income absorb these types of costs?

[SusanBAnthony]

Our interest rates, insurance, and taxes are all unremarkable to me. Maybe we just haven't had big changes in those in my area (excepting interest rates, we just got lucky there).

What I notice is the wildly expensive cost of fixing or improving anything. Yes the improvements are optional. On a normal basic house in good shape there are still constant expenses to keep it in good shape. A random list of recent or upcoming ones for us:

Plumber, shower handle broke and we tried to fix it and failed: 1200$

Electrician, upgrade to 220V as all circuits were full and it was going to become a safety issue: 7k

Basic concrete patio (optional, but it's a pretty standard feature): 9k

Redo front steps and brick work that is crumbling to the point that it must be fixed: TBD but when we got it quoted 4 years ago it was 15k, so now it's probably 25k

Carpet cleaning: 500$ a year, and it probably needs to be replaced in 5 more years.

Fridge, oven, and dishwasher all died and were replaced 4years ago, fridge has broken twice since then and had to be repaired at 300$ a pop.

And we have been lucky that the heat, air conditioning, water heater, roof, windows, etc etc etc haven't needed to be replaced. At some point those will hit. And we have the skills to do some basic plumbing.
Then add in that appliances seem to be built to last about 3 years and you are replacing or repairing a kitchen appliance annually! Routine maintenance is EXPENSIVE.

[Deleted]

Apr 14, 2024 7:59:26 GMT -5 krystee said:

Our property taxes are $11,000 on a home under $500K. It’s brutal.

Our paver patio is sinking requiring at least a $4K fix. Our basement has mold, which adds several more thousands (it was in a hidden area we didn’t see and we are going to redo the entire drywall plus fix whatever is causing it. How does the average income absorb these types of costs?

It doesn’t….which is why so many homes have deferred maintenance.

[bee20]

Definitely. My taxes have more than doubled since I bought despite the area growing and adding tons more homes as single houses are converted to 4-packs. Insurance has gone up 4x since I bought. Repairs I mostly do myself but everything at Home Depot is expensive now so even DIY isn't cheap. I had thought that owning a house would give me financial security as the P&I gets cheaper every year with inflation, but costs are still definitely up and I can see myself switching to renting as I age and can't do my own work.