While many Americans still consider homeownership a cornerstone of wealth building and financial security, recent research reveals 52% of homeowners are surprised by the “hidden” costs of owning a home.
The study from Clever Real Estate showed the average U.S. homeowner spends $15,405 a year on home maintenance, improvements, and other costs — in addition to their monthly mortgage payment. In fact, with the housing market becoming increasingly unaffordable since the start of the pandemic, one in eight homeowners say the benefits of owning a home just aren’t worth the hassle.
Consider these other key findings from the study:
- A majority of homeowners (60%) have experienced buyer’s remorse, including one in four homeowners who say they often feel buyer’s remorse.
- The number of homeowners spending more than 40% of their household income on housing has nearly doubled, jumping from 16% before the pandemic to 29% now.
- More than 70% of homeowners regret at least one aspect of their home purchase, most commonly that their home requires too much maintenance (40%), is too small/lacks features they want (32%), or that they were unprepared for hidden costs (30%).
- Homeowners spend an average of 19 hours a month on maintenance, repairs, and improvements — which adds up to nearly 230 hours per year.
- One-third of homeowners spent more than $5,000 on maintenance in 2021.
- Homeowners spend about $2,000 more than renters on utilities annually.
The home buying process may seem fairly straightforward, but the data shows a significant portion of buyers find ownership itself full of surprises — and sometimes regrets.
The cost of homeownership surprises many, leading to regrets
At least 60% of buyers say they’ve felt some degree of buyer’s remorse, and rates of buyer’s remorse have increased significantly since the start of the pandemic. In 2019, 20% of homeowners said they sometimes or often felt buyer’s remorse, compared to 45% in 2022. That includes the number of homeowners who say they “often” feel buyer’s remorse, which jumped to a startling 25% from 5% in 2019.
Pandemic pessimism might be one reason homeowners are feeling regrets about their home buying choices. But another contributing factor may be that among mortgage payments, maintenance, and upkeep, almost half of American homeowners (45%) are spending more than the recommended 30% of their household income on their living space. The portion of homeowners who spend more than 40% of their income on housing has nearly doubled since the start of the pandemic — 29% today, up from 16% in 2019.
In an ultra-competitive real estate market, buyers rarely get the home of their dreams, particularly first-time buyers. Nearly 72% of the homeowners Clever surveyed say they’re unhappy with some aspect of their house. The most common complaints were that it requires too much maintenance (40%), the house was small or lacking in features (32%), hidden costs (30%), or expensive monthly mortgage payments (28%).
The hidden costs of buying a home
Of course, buying a house is more than just a down payment and a mortgage. There are several costs first-time homeowners need to consider before calculating the true cost of buying a home.
Closing costs refer to all fees associated with completing the purchase of a home beyond the sale price of the home itself. Closing costs typically range between 3% to 6% of the purchase price and may include loan origination, mortgage broker, attorney, and appraisal fees, as well as title insurance, private mortgage insurance, and home inspection costs. Real estate agents will typically receive a commission that is 5% to 6% of the home’s sale price. On a $275,000 (the median U.S. home price in early 2020), closing costs can run between $8,250 and $16,500.
Taxes and insurance
The annual cost of homeownership, beyond a monthly mortgage payment, includes property taxes and homeowners insurance, which together cost the average U.S. homeowner more than $4,000 each year.
Clever’s report found that on average, homeowners each year pay approximately $2,578 in property taxes and $1,680 in homeowners insurance, although costs vary widely depending on location. According to Census data, states in the Northeast are the most expensive, where a homeowner in New Jersey might have a median tax bill of $8,400 annually, while homeowners in Alabama will pay only $609.
Similarly, Colorado homeowners may pay an average of $3,383 each year in homeowners insurance, while homeowners in Delaware might pay only $781.
Utilities are another budget item to consider. Homeowners are spending more than $4,800 each year for services like gas, electricity, water, internet, phone, and garbage removal. Compare that to the $2,866 average that renters around the U.S. spend on the same services. Houses typically have larger square footage than most apartments and are therefore more expensive to heat and cool than apartments. Electric bills have risen during the pandemic as people spent more time at home.
Maintenance and repairs
The research also found that out of the 60% of homeowners who have felt some sort of buyer’s remorse, 39% of them regret how much maintenance their home requires. According to the survey, one-third of homeowners said they spent at least $5,000 on maintenance and repair costs in 2021.
In addition, the survey found the average homeowner spends about 19 hours per month — nearly 230 hours per year — on home maintenance and repairs. A good portion (21%) of homeowners say they spend at least 31 hours per month on home maintenance and improvements, which is a significant jump from 2019 when just 3% said they spend that much time on their homes.
That increase might be attributed to the pandemic causing more homeowners to focus on the living space they have rather than deal with in an ultra-competitive market to buy a new home. Regardless, nearly all homeowners (89%) say they spend at least five hours per month on maintenance and improvements.
The true cost of homeownership unquestionably requires buyers to take a step back and consider their investment from every angle, both short and long term.
Find solutions to pay off debt so it’s easier to afford the costs of homeownership.
Article last modified on April 20, 2023. Published by Debt.com, LLC