Understanding the True Cost of Homeownership: Budgeting for Hidden Expenses

Sumedha Shukla
March 14, 2023

Owning a home comes with numerous expenses, and a recent analysis conducted by Zillow® and Thumbtack reveals that these costs are higher than ever. When factoring in utility bills, property taxes, insurance, and essential home maintenance, the average U.S. homeowner faces an annual financial burden of $14,155. That’s an additional $1,180 per month on top of regular mortgage payments. For first-time home buyers struggling with affordability in today’s market, it’s crucial to comprehend and budget for these often overlooked expenses when determining how much home they can afford.

Interestingly, these costs can be particularly staggering in already expensive metropolitan areas, reaching up to $22,000 annually in cities like San Francisco, New York, and Los Angeles. Among the 39 metro areas analyzed, the lowest hidden homeownership costs were found in Las Vegas ($9,886), Asheville, North Carolina ($11,318), and St. Louis ($11,824).

The research conducted by Zillow and Thumbtack focused on three unavoidable expenses for single-family homeowners: property taxes, homeowners insurance, and utility payments (including energy, water, natural gas, and internet). On a national level, these costs averaged $7,742. New Yorkers face the highest property taxes, surpassing $9,000 annually, while Hartford, Connecticut residents contend with the highest utility costs, averaging $4,443 per year. Homeowners insurance expenses vary depending on home value, granting those in more affordable metro areas like Pittsburgh and Cleveland the advantage of lower insurance bills.

Additionally, the analysis took into account Thumbtack’s data on 17 essential home maintenance projects, utilizing information from millions of completed home projects nationwide. These projects come with an average combined cost of $6,413 annually. Los Angeles and Chicago topped the list for highest average maintenance costs at $8,639 and $7,722, respectively. In contrast, homeowners in Las Vegas can expect to spend just $3,467 per year on home maintenance.

Methodology:

  • Property taxes were calculated using the median effective tax rate multiplied by the area’s median home value based on the Zillow Home Value Index.
  • Insurance costs were estimated by assuming homeowners pay 0.5% of their home’s value annually, calculated as 0.005 multiplied by the area’s median home value according to the Zillow Home Value Index.
  • Utility costs were calculated using the unweighted average across all states, excluding streaming and phone bill expenses, as reported by Forbes.
  • The annual costs of home maintenance encompassed Thumbtack’s essential categories, representing necessary annual tasks. The pricing data is based on projects requested on Thumbtack and reported by independent service professionals or customers.

Understanding the true cost of homeownership is vital for making informed financial decisions. By acknowledging and budgeting for these hidden expenses, homeowners can navigate the financial responsibilities of owning a home more effectively. If you’re considering purchasing a home or know someone who is, reach out to us at Your Home Sold Guaranteed Realty for expert guidance and support in managing these costs.

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