Americans who recently spent big to purchase a home are now learning that down payments and mortgage installments are merely the tip of an expensive iceberg.
On top of their mortgage, the average homeowner spent $17,459 on housing costs last year, according to a new survey of 1,000 U.S. homeowners from Real Estate Witch, a real estate education platform.
So how does an asset that’s supposed to build long-term wealth end up costing so much? The answer lies in the hidden costs that come with homeownership, such as maintenance, improvements, utilities, taxes, and insurance. Combined, those costs have outpaced inflation — climbing 13% from the previous year.
Last year, homeowners spent an average of:
- $4,975 on utilities
- $4,283 on maintenance
- $3,890 on home improvements
- $2,795 on property taxes
- $1,516 on homeowners insurance
Rising Rates of Buyer’s Remorse
The cost of homeownership is growing, and so are regrets among home buyers. The number of homeowners experiencing buyer’s remorse increased from 35% in 2019 to 65% in 2023, according to Real Estate Witch’s report.
The economic consequences of the COVID-19 pandemic led to a rapid rise in home prices, as many Americans sought houses outside of crowded cities. In order to compete with other buyers, some took on more risk during the purchasing process, committing to houses that required more maintenance without the benefit of a pre-purchase home inspection.
“To make our offer more attractive, we waived our inspection contingency,” said Kate Ohlhausen, who purchased a home in Fairfax County, Virginia in 2021. “Luckily, it worked out fine for us and there were no major issues, but I would not do that in (the) future.”
For those lucky enough to win a 2021 bidding war, that offer for hundreds of thousands above asking price meant less cash to tackle the hidden costs of owning a home.
More than half of the homeowners (57%) surveyed by Real Estate Witch said they would have approached their home purchase differently had they known how much they’d spend to maintain their house.
Americans Spend Thousands on Home Maintenance
It’s not uncommon for the cost of maintenance to catch buyers by surprise. The average homeowner spent over $4,283 on maintenance last year — a sharp increase from the previous year’s average of $3,018.
Buying a home that requires too much maintenance was the most common regret among homeowners surveyed. Additionally, 34% said the person they bought their house from was not transparent about the extent of maintenance the home required.
Apart from money, repairs and renovations also drain a homeowner’s time. The survey found the average homeowner spends a little over 17 hours each month — more than 200 hours a year — working on maintenance and home improvements.
In addition to maintenance costs, the average homeowner reported spending $3,890 on remodels or renovations in the last year. Looking ahead, about 95% of homeowners plan to take on a major home improvement project in the next five years, such as a kitchen remodel (34%) or bathroom remodel (33%), both of which often cost upward of $10,000.
Taxes, Insurance, and Utilities Add to Homeownership Costs
Overall, 90% of homeowners surveyed said the cost of owning a home was higher than they anticipated.
Specifically, one-third of respondents (33%) said they were surprised by the cost of property taxes. Today, the average homeowner spends about $2,795 on residential property taxes, and that number has grown thanks in part to the buying frenzy of the pandemic, which generally raised home values.
Homeowners insurance, meanwhile, was more expensive than expected for 23% of homeowners, costing an average of $1,516.
Utility costs can also burn a hole in homeowners’ budgets. New homeowners who are accustomed to landlords covering part of those costs may be unprepared for a sudden spike in prices. The survey’s research shows the typical renter pays $2,845 in utilities annually, while the average homeowner spends almost double that amount ($4,975).
To make matters worse, many homeowners are concerned that their utility bills will rise even higher. Another Real Estate Witch survey found two-thirds of American consumers (62%) expect their utility costs to increase in 2023 because of inflation.
The data paints a pessimistic financial picture for Americans of all types, whether they’ve already achieved homeownership or not.
This article was produced by Real Estate Witch and syndicated by Wealth of Geeks.
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