Rising non-mortgage homeownership expenses are adding thousands to household budgets

WASHINGTON (TNND) — The extra costs of owning a home beyond the mortgage have begun to level off after years of sharp increases, but homeowners are still spending far more on upkeep, insurance and taxes than they did before the pandemic-era housing surge, creating another strain in an already costly market.

According to an analysis by Zillow and Thumbtack, the average homeowner now pays $16,566 a year in “hidden costs” for maintenance, property taxes and homeowners insurance. That figure is up 32% over the past five years, well ahead of inflation, and adds nearly $1,400 a month to housing costs.

Those expenses are especially difficult for first-time buyers, who cannot tap home equity and are already trying to save for down payments. A separate August analysis by Redfin found that Americans need to earn nearly $110,000 a year to afford the median-priced home, about $22,000 more than the typical household income.

There are also signs that the pressure is easing somewhat. The total cost of owning a home beyond the mortgage rose just 3% over the past year, a major slowdown from the 32% jump seen over the previous five years. Even so, homeownership remains significantly more expensive than it was before.

Buying a home has become more difficult since pandemic-era mortgage rates that were historically low brought a flood of buyers into the market, intensifying competition for a limited supply of homes and driving prices sharply higher. Higher mortgage rates have slowed sales for the past three years, but they have not produced a meaningful drop in asking prices in much of the country.

Those pressures have been amplified by years of elevated inflation, which has remained above 2% for more than five years and pushed up costs across the board while reducing purchasing power. More recently, wages have struggled to keep up, putting additional pressure on household budgets.

“The hidden costs of homeownership are a big piece of the affordability puzzle, and one that’s easy to overlook,” Zillow senior economist Kara Ng said. “In a market where prices and mortgage rates have already stretched budgets, that can be the difference between a home that’s within reach and one that’s not, especially for first-time buyers with less room to absorb surprises.”

The largest share of those added costs comes from maintenance, which averages more than $11,000 a year for a typical homeowner and is even higher in expensive metro areas such as Boston and Los Angeles. Inflation has played a major role in that rise by pushing up the price of materials and labor.

Still, the pace of those increases has slowed since 2022, with maintenance costs rising just 1% since last year. That has provided some relief, though homeowners are still paying much more for upkeep than before the pandemic.

Insurance premiums have also risen faster than inflation in recent years as labor and materials have become more expensive and more parts of the country face severe weather that causes billions of dollars in damage each year. As more regions have become vulnerable, insurers have spread their risk across a wider customer base.

In disaster-prone states such as Florida and California, some major insurers have stopped offering new policies or reduced their exposure, leaving homeowners with fewer choices, higher prices or the option of going without coverage.

Those trends have pushed insurance premiums up 54% over the past five years, according to the analysis. But the pace has recently cooled, with prices rising just 0.7% since the start of the year and 1% over the past 12 months, according to Bureau of Labor Statistics data.

“Homeowners insurance premiums have climbed faster than any other cost of owning a home, as insurers have caught up to a riskier world,” Ng said. “The latest cooling in premiums is a welcome sign, but it looks more like a slower climb than a turning point, because premiums are still far above where they were just a few years ago.”

Property taxes have also become more burdensome for many homeowners, particularly in areas where home values have surged in recent years. Higher property values can trigger larger assessments and bigger tax bills, increasing the cost of owning a home beyond the mortgage payment.

Homeowners now pay an estimated $3,129 a year in property taxes, or nearly 19% of hidden homeownership costs, according to Zillow and Thumbtack. In some states and municipalities, tax growth has been partly limited by policies that slow how quickly assessments or tax bills can rise.