May 29th 2024.
Real Estate Witch's new report, "The True Cost of Homeownership 2024 Data," has shed light on the financial reality of owning a home. According to the study, which surveyed 1,000 homeowners, the average homeowner spends a whopping $17,958 each year on additional expenses - a staggering 78% higher than what most people expect to pay, which is around $10,094.
This eye-opening disparity has left nearly 9 out of 10 homeowners in agreement that homeownership is much more expensive than they initially anticipated. With interest rates hovering around 7%, mortgages have become a significant burden for buyers, and falling home prices due to lower demand have also cost sellers potential profits. As a result, many homeowners are choosing to hold onto their current homes instead of buying or selling.
However, the report highlights that this decision comes with its own set of "crushing costs." Apart from the recurring mortgage payments, homeowners must also deal with various property-related expenses, including homeowners insurance, property taxes, utilities, renovations, and maintenance. This financial strain has taken a toll on homeowners, with 36% saying that their home is a detriment to their finances and 23% citing a negative impact on their mental health.
The report also reveals that the average homeowner spends over $4,000 each year on maintenance and repairs alone, which has driven some to accumulate significant debt just to cover these expenses. Excluding mortgage principal and interest, 3 in 5 homeowners dedicate at least 10% of their income to cover additional costs for their home. Shockingly, around 20% have even resorted to taking on more debt, using measures such as credit cards, loans, dipping into retirement savings, and even selling valuable possessions.
According to the Department of Housing and Urban Development, housing is considered unaffordable when it exceeds 30% of one's income. Based on this threshold, it's likely that many homeowners are struggling to keep up with the unforeseen expenses noted in the report, such as roof work, plumbing, HOA fees, electrical work, appliances, and even foundation repairs.
The financial strain has left around 67% of homeowners with regrets about their decision to become a homeowner, with over 40% of recent buyers admitting that they overpaid for their property. Matt Brannon, the author of the report, recently shared with BLACK ENTERPRISE how the costs have left around 65% of Black homeowners regretting their decision to buy a home, and 55% feeling buyer's remorse.
The report also notes that with an average yearly expense of $17,958, it would take a homeowner just five years and seven months to accumulate $100,000 in additional expenses. Over the course of a 30-year mortgage, that amounts to a staggering $538,740 - enough to buy a second house!
Faced with such exorbitant costs, about 295 of the surveyed homeowners plan to sell their properties within the next five years, as the expenses prove to be unattainable for the average American. Additionally, more than 1 in 4 homeowners express a desire to go back to renting. Many now state that they would have approached their purchase differently if they had known the actual costs of maintaining a home.
For aspiring homeowners, the report offers insights from current homeowners on what they would have done differently. This includes purchasing low-maintenance properties, negotiating prices or contingencies, saving more, paying for inspections, opting for less expensive homes, or waiting for more favorable mortgage rates and prices. According to previous reports, for Gen Z and millennial buyers, over one-third have turned to their parents for assistance in purchasing a home.
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