Achieving home ownership is a goal for millions of Americans, but it’s become increasingly expensive to purchase a home in the United States due to a lingering combination of low inventory, inflation, and serious competition.
Prices have skyrocketed in the past few years in real estate hotspots like California, with the California Association of Realtors (CAR) estimating that 2024 will see median home prices rise more than six percent throughout the year to an astounding $860,300.
However, it’s not just home prices that are causing many families to take a hard look at their budgets. Now, according to a report from Fox Business, the costs homeowners encounter after they’ve gotten the keys to their new home are much higher, too.
Figures shared by Fox indicate that the costs associated with owning a home in 2024 have risen to an average of $18,118, which doesn’t include the average cost of a mortgage. Just four years ago, the costs associated with owning a home sat at an average of $14,428, or about 26 percent less than today.
Where are Costs the Highest for Home Ownership?
According to statistics shared by MortgagePoint, costs are highest in states where costs are almost always higher than the national average. Hawaii and California lead the nation with the highest home ownership costs, followed by Massachusetts, New Jersey, and Connecticut.
Various factors lead to high home ownership costs in each of these states, and there’s not any single cost driving up the average. For Connecticut homeowners, high property taxes are partially to blame for high ownership costs. In Massachusetts, homeowners pay a higher rate for homeowners insurance, which drives up ownership costs.
Meanwhile, the least expensive places to own a home are Kentucky, Arkansas, Mississippi, Alabama, and Indiana. Not only do these states have more affordable home prices, but the costs associated with owning a home in these states are far less expensive, too.
Overall, homeowners can expect to have costs ranging from $11,559 to $12,259 associated with owning a house in the most affordable states in the country. Meanwhile, the most expensive states come with a price tag that ranges from $23,515 to $29,015.
Home Insurance Costs Surge Across the Nation
For many families, one of the biggest increases seen in home ownership costs has been with insurance. Insurance Business Magazine reports that insurance rates have risen across the country, even in less expensive states. Between 2021 and 2023, homeowners saw their homeowners insurance rates increase by around 20 percent.
Unfortunately, the magazine indicates that 2024 hasn’t brought a slowdown in rising rates despite slowing inflation throughout the economy. Insurance Business Magazine cites the annual Home Insurance Projection Report as forecasting a six percent rise in annual premiums in 2024.
With that increase, the national average is estimated to reach $2,522 by the close of the year. There is also the expectation that a heavy hurricane season will push rates even higher throughout 2025, especially in locations like Florida.
Identifying the Hidden Costs of Home Ownership Before Purchasing a Home
Future homeowners may find it helpful to estimate the costs associated with owning a home so as not to become “house poor” after getting the keys to their new home. House poor is a phrase used to describe unfortunate homeowners who don’t realize how much they’ll spend on their homes beyond their mortgage payments.
It’s not just the loan payments but the property taxes, homeowners insurance, and private mortgage insurance, as well as all the bills and upkeep that come with keeping a house. And it’s much more than the cable bill and the utility payments.
Home ownership also comes with repairing leaks to the roof, getting the water heater replaced, and having all sorts of systems inspected, upgraded, and repaired. For homeowners across the nation, all of these costs have risen, leading to historically high costs associated with owning a home.
Is There Any Good News in the World of Home Buying?
Although costs continue to rise in so many areas of home ownership, there are some encouraging signs regarding the overall real estate industry. For example, further details from CAR suggest that housing affordability won’t continue to fall as housing costs increase.
The association expects housing affordability to remain constant, which isn’t cause for celebration but is still a subtle indication of the positive growth and health of the economy, as well as the expected growth of average household income. Housing prices are rising, but affordability isn’t going down.
Furthermore, a report from Business Insider suggests that homeowners can expect mortgage rates to come down in the second half of the year. Homeowners interested in refinancing their high rates could see opportunities come around as 2024 draws to a close and the Federal Reserve makes a move.
Future homeowners that haven’t yet started an official search for a home may want to keep an eye on costs, as well as interest rates, to find the most opportune time to buy a home in 2024.
Have questions?
If you or anyone you know has questions about financing or the current housing market, your expert Los Angeles mortgage brokers at Peak Finance are here to help. Contact us today at info@peakfinanceco.com.