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This trend is causing more homeowners to be “cost-burdened,” spending over 30% of their income on housing expenses, according to a 2023 analysis of U.S. Census data by the Chamber of Commerce.
Many homeowners are surprised by two key expenses that tend to increase with home values: property taxes and insurance costs. Mark Hamrick from Bankrate notes that rising property values lead to higher property taxes, which can significantly increase the cost of homeownership. A study by CoreLogic found that homes reassessed between 2019 and 2023 saw a median tax increase of 25%, with annual median taxes rising by more than $600.
Home insurance costs have also surged, with a 20% increase in average premiums between 2021 and 2023, and a projected additional 6% increase by the end of 2024, according to Insurify. States like Florida, Louisiana, Texas, and Colorado have experienced the highest increases, driven by extreme weather events. In Florida, the average annual home insurance rate was nearly $11,000 in 2023, more than $8,600 above the U.S. average.
Advice for Homebuyers
- Consult Your Realtor: Devon Viehman from the National Association of Realtors suggests homebuyers work closely with their realtor to understand the full cost of homeownership, including property taxes, insurance, and utility bills.
- Budget Wisely: Viehman also advises potential buyers to set a lower mortgage budget than their maximum qualification to allow room for unexpected expenses.
- Check State Laws: Look into whether your state has laws limiting annual property tax increases.
Tips for Current Homeowners
- Seek Assistance: If struggling with mortgage payments, the Consumer Financial Protection Bureau recommends contacting the Department of Housing and Urban Development for potential aid and reaching out to your mortgage servicer to discuss possible repayment plans or loan modifications.
- Compare Insurance Rates: Consider switching insurance providers if rates become prohibitively high. Viehman suggests interviewing multiple insurance companies, lenders, and realtors to find the best deals and services.
By addressing these considerations, both prospective and current homeowners can better manage the financial pressures associated with rising home valuations and associated costs.