Be prepared to shell out an extra $18,000 a year on extras if you own a home
Americans spend as much as the cost of a used car every year on hidden expenses associated with owning and maintaining their homes, according to a new analysis.
Bankrate’s new Hidden Costs of Homeownership Study found that the average annual cost of owning and maintaining a typical single-family home in the U.S. is $18,118.
That figure is 26% higher compared to just four years ago.
"Homeownership is an important wealth-builder for many Americans, but it ain't cheap," Bankrate analyst Jeff Ostrowski said in a statement.
Bankrate calculated their numbers using inflation-adjusted averages of property taxes, homeowners insurance, energy, internet, and cable bills.
They also factored in repair and maintenance costs, equivalent to 2% of the median sales price of a single-family home in the U.S.
The national average adds up to an additional $1,510 per month in hidden expenses on top of the mortgage payment.
“It’s just important to understand that you’re buying a lot more than a mortgage payment,” Ostrowski told CNBC. “You’re also buying all these additional costs that you’re gonna have to figure out how to pay for.”
With a median mortgage payment of $2,256 as of April, according to the Mortgage Bankers Association, it’s a one-two punch of high mortgage rates and hidden expenses.
You guessed it: inflation is to blame again
Hidden expenses aren’t so hidden anymore for a lot of reasons.
Home prices have surged 40% since the pandemic began, with the median price of an existing home jumping from $280,700 in March 2020 to $393,500 in March 2024.
Additionally, consumer prices grew 21% over the same period. Everything from your home’s light bulbs to your Wi-Fi costs a prettier penny than a few years ago.
Finally, insurance premiums are also on the rise—thanks to rising home prices, higher construction costs, and frequent natural disasters.
The most and least expensive states for hidden expenses
The states with the highest extra housing costs, according to Bankrate, are Hawaii ($29,015 per year), California ($28,790), Massachusetts ($26,313), New Jersey ($25,573), and Connecticut ($23,515).
Conversely, the states with the lowest additional homeownership costs are Kentucky ($11,559), Arkansas ($11,692), Mississippi ($11,881), Alabama ($12,259), and Indiana ($12,259).
The costs of homeownership vs. renting
Given these new figures, you might wonder if homeownership is still worth it.
According to Creditnews Research, the answer is yes. Over 23 years, homeowners spent an average of $454,092 on homeownership costs—24% more than renters.
The biggest expenses were interest charges (30.9%), principal payments (22.7%), and maintenance (21.3%).
However, homeowners gained an average of $376,722 in equity, thanks to a 159% rise in home prices.
So, while renting might seem tempting amid rising hidden homeownership costs, owning a home still proves to be a better wealth-building option. Just remember, the mortgage is only the beginning.