Hidden costs of homeownership reach $16K per year

A new Zillow and Thumbtack analysis reveals how rising costs are reshaping the price of owning a home

• Insurance, maintenance and property tax can cost the average homeowner $15,979 per year. 
• Insurance premiums have surged 48% in the past five years, exceeding household income growth. 
• Hidden costs are highest in already expensive coastal metro areas, exceeding $24,000 in New York and $22,000 in San Francisco.   

A new analysis from Zillow® and Thumbtack® finds that the hidden costs of homeownership now add up to $15,979 per year nationwide, climbing faster than incomes and straining affordability across the country. That’s an additional $1,325 per month on top of a mortgage payment. Here’s where the money goes each year for the typical U.S. homeowner:

• $10,946 on maintenance
• $2,003 on homeowner’s insurance
• $3,030 on property taxes

Together, those costs have increased 4.7% in the past year, while household incomes rose just 3.8%. The squeeze is sharpest in expensive coastal metros, where hidden costs reach $24,381 in New York City, $22,781 in San Francisco and $21,320 in Boston.

Insurance premiums have risen 48% nationwide since February 2020, topping $2,000 annually on the typical home. However, in Miami, premiums average $4,607 per year, up 72% in the past five years. Other Florida metros have seen similar spikes, including Jacksonville (72%), Tampa (69%) and Orlando (68%). Outside of Florida, insurance costs are up 79% in New Orleans, 59% in Sacramento, 58% in Atlanta and 56% in Riverside, California.

“Insurance costs are rising nearly twice as fast as homeowner incomes,” said Kara Ng, Zillow senior economist. “It’s not just a budget line item. It’s a barrier to entry for aspiring first-time buyers and for families already stretched thin. Buyers who are already facing affordability challenges in today’s market need to understand and budget for these less obvious expenses when calculating how much home they can truly afford.” 

Here are four tips for prospective buyers:

• Know your true buying power. Start with BuyAbility^SM, a personalized affordability tool available on the Zillow app. It allows you to set a target monthly payment, which can be adjusted to account for these costs. 
• Plan for maintenance costs early. Homeownership doesn’t end on closing day. Using Thumbtack’s free personalized maintenance guides, available on the Thumbtack app, buyers can anticipate ongoing upkeep expenses to avoid surprises and budget with confidence.
• Reconsider the type of home you buy.  A large single-family home with a big backyard often comes with higher maintenance costs. Budget-conscious buyers can explore more affordable options, such as townhomes or condos, which may offer less upkeep.
• New construction can save later. Sometimes spending more upfront pays off. A new-construction home typically requires less maintenance in the near term, allowing you to enjoy your new space with fewer unexpected repair bills.

“Home maintenance is often one of the most overlooked parts of owning a home when it comes to budgeting for the year,” said Morgan Olsen, Thumbtack home expert. “Think of preventative maintenance as a safety net for your biggest asset. Spending a little each season helps spread out costs and keeps your home prepared for whatever the weather brings.”

Crunching the numbers

For this analysis, Zillow estimated annual property tax and homeowners insurance costs for a typical U.S. homeowner, then compared year-over-year changes and pre-pandemic benchmarks. Thumbtack added estimates for annual costs of home maintenance, plus preventive weather-related maintenance projects. 

Thumbtack’s essential annual costs of home maintenance include: appliance maintenance, carpet cleaning, central air conditioning maintenance, deck staining and sealing, duct and vent cleaning, fireplace and chimney cleaning, full-service lawn care, gutter cleaning and maintenance, heating system maintenance, house cleaning, pressure washing, roof maintenance, sprinkler and irrigation system maintenance, tile and grout cleaning, tree trimming and removal, water heater maintenance and window cleaning.

Pricing data is based on projects requested on Thumbtack and reported directly by the independent service professional or individual customers. The cost is an unweighted index of all yearly home maintenance projects and is calculated on a quarterly basis using a moving average.

SOURCE Zillow Group, Inc.