It’s not just home prices that are high, insurance and taxes are up, too.
The costs of affording a home in 2018 are harder on homebuyers than they’ve been in 25 years, several recent studies say.
Housing affordability is down 5 percent, says a study from Arch Mortgage Insurance Company. And it’s predicted to sink 10 to 15 percent lower by the end of the year.
In this roundup, we go over the increasing costs of owning a home. From homeowners insurance rates to property taxes, owners can expect to pay more this year than in decades.
Rising housing costs
Real estate experts predict home values to increase over the next two years, according to the study. This is good for current homeowners, but not so much for potential homebuyers.
“If mortgage rates and home prices continue to rise as expected, affordability will get hammered by year-end as demand continues to outstrip supply,” says Arch Mortgage’s global chief economist Ralph G. DeFranco. “A strong U.S. economy combined with a housing shortage in many markets means that there is little hope of any price drop for buyers.”
Most (68 percent) average wage earning Americans can’t afford homes with costs smack dab between the most expensive, and cheapest, says a study from data solutions company ATTOM. The median annual household income — which is the number between highest and lowest — in the U.S. is $57,617, according to the most recent Census Bureau data.
Across the country, the home price between the highest and lowest is $229,500. The buyer needs to earn $57,009 yearly, before taxes, according to the study. Putting 3 percent down on a home, the buyer can’t afford to spend more than 28 percent “front end” debt-to-income ratio, which is: the mortgage, property taxes and insurance, divided by the buyers annual income before taxes.
This doesn’t mean owners are off the hook, financially speaking. Overall housing costs are up and will continue to rise. And insurance and property taxes have also been on the rise.
Insurance and property tax hike
Homeowners insurance rates have risen every year over the past decade, says a study from QuoteWizard, an online insurance market place. The main reason for rising costs? Natural disasters.
“Expensive and frequent disasters are taking a financial toll on homeowners across the country,” the study says. “Natural disasters are both more frequent and costlier.”
The number of disasters has quadrupled since 1970, according to the United Nations. And 2017 was the costliest year for natural disasters, says a study from the National Centers for Environmental Information. Damages exceeded $300 billion, which vastly surpassed the record of $214.8 billion spent in 2005, the year of Hurricane Katrina.
Property taxes on single family homes in the U.S. increased 6 percent from 2016-2017, according to another study from ATTOM.
The data solutions company analyzed property taxes from more than 86 million U.S. single family homes. The U.S. paid $293.4 million in property taxes last year, compared to $277.7 billion the year before. The average property tax on a single family home in the U.S. increased from $3,296, in 2016 to $3,399 in 2017, according to ATTOM.
Homes sell at record speed
Homes sold faster than ever in 2017, says a study from real estate listing site Zillow.
The housing market has been limited for the past three years. Houses between the least and most expensive in America took only 81 days to sell in 2017, which is nine days less than 2016. The low inventory may be causing home prices to increase, Zillow’s study says. Last year, close to a quarter of homes sold for more than the original listed price.
“As demand has outpaced supply in the housing market over the past three years, buying a home has become an exercise in speed and agility,” says Zillow senior economist Aaron Terrazas. “This is shaping up to be another competitive home shopping season for buyers, who may have to linger on the market until they find the right home but then sprint across the finish line once they do. Being prepared – working with a great agent, getting financing preapproved – can help a buyer make a stand-out offer.”
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Article last modified on May 27, 2018. Published by Debt.com, LLC . Mobile users may also access the AMP Version: Home Costs Won’t Slow Down This Year - AMP.