Homeownership Costs Jump 26% Since Start of Pandemic: What You Need to Know

Hello LinkedIn community,

As many of you may already know, the financial landscape of homeownership has dramatically shifted over the past few years. According to Bankrate’s newly released Hidden Costs of Homeownership study, the average cost of owning a home has surged by 26% since the start of the COVID-19 pandemic. This translates to more than $18,000 annually, or about $1,510 per month, on top of your mortgage payment. Let's dive into the details and explore what this means for current and prospective homeowners.

Rising Home Prices and Increasing Costs

The pandemic has triggered a significant increase in home prices, which have gone up by 40% due to a lack of inventory. This shortage has made it a seller's market, driving up costs for buyers. Additionally, growing property taxes and rising homeowners insurance premiums, particularly in states with elevated risks, have contributed to this surge in expenses.

“Homeownership is an important wealth-builder for many Americans, but it isn’t cheap,” says Jeff Ostrowski, a Bankrate analyst. He likens the annual cost of owning a home to buying a used car every year. While the investment in homeownership can be rewarding, it’s crucial to be mindful of the ongoing expenses that come with it.

Understanding the Costs

Bankrate’s study highlights the various components that contribute to the average annual cost of homeownership. These include property taxes, homeowners insurance, maintenance costs, and utility bills such as energy, internet, and cable. On average, these costs amount to 2% of the typical home value, which was $436,291 in March 2024, according to Redfin.

To put this in perspective, back in 2020, the average annual cost was $14,428, or $1,202 per month. The most expensive states for homeownership costs are Hawaii, California, Massachusetts, New Jersey, and Connecticut, with Hawaii leading the list at $29,015 annually.

Planning for the Unexpected

One key takeaway from this data is the importance of budgeting for unplanned expenses. Ostrowski advises homeowners to include a cushion in their monthly budgets to absorb the shock of unexpected costs. “After you achieve homeownership, you need to fatten up your emergency savings account for all those surprise repairs,” he adds.

Mitigating Costs with Home Warranties and Property Management

Given the rising costs, it's more important than ever to find ways to manage and mitigate expenses. One effective strategy is to invest in a home warranty. A home warranty can cover major systems and appliances, reducing the financial burden when these items inevitably need repair or replacement. This can be a lifesaver, particularly when unexpected issues arise.

For those managing rental properties, working with a company like Puls can be incredibly beneficial. Puls provides comprehensive property management services, ensuring that maintenance and repair issues are handled promptly and professionally. This not only helps in maintaining the property’s value but also frees up your time and reduces stress. With a reliable property management partner, you can ensure that your rental portfolio is well-maintained, which ultimately protects your investment and keeps your tenants happy.

Conclusion

The rising costs of homeownership underscore the need for careful financial planning and a proactive approach to managing expenses. While the journey of owning a home is filled with its challenges, understanding and preparing for these hidden costs can help ensure a smoother experience. Remember, while we can’t control every expense that comes our way, we can control how we respond and plan for them.

Here’s to navigating the financial journey of homeownership with wisdom and resilience!

Reference

Nunes, F. F. (2024, June 10). Homeownership costs jumped 26% since start of pandemic: Bankrate. HousingWire. Retrieved from HousingWire.