2018 has been a banner year for homeowners in many regards. For example, cumulatively homeowners gained nearly $1 trillion in home equity in the first half of the year alone. More than 95 percent of mortgaged homes are now showing positive equity, leaving fewer than five percent of homeowners with mortgage loans “underwater” on their properties. Across the financial sector, analysts happily predicted that the strengthened position of homeowners would result in additional spending, economic growth, and lots and lots of home-improvement expenditures.

Of course, just because the “average homeowner” gained an average of $16,200 in equity this year does not necessarily mean every homeowner did so. In fact, a lot of those gains were focused out west, where states like California posted average homeowner equity gains of nearly $50,000. For households considering moving from renting to owning, here are a few of the “hidden” costs of homeownership that sometimes get lost in the excitement of a positive housing market:

  • 41% The percentage of monthly income the average buyer looking for a median-priced home will spend on total monthly housing costs once utilities are factored in. Just remember: The Consumer Financial Protection Bureau does not permit more than a 43 percent debt-to-income ratio on qualified mortgages, but utilities do not factor in when a mortgage is originated.
  • 5% The percentage of the purchase price you might expect to pay in additional closing costs on a new home. Just remember: If you are only planning to stay in a home for a year or two, you might not fully recoup closing costs and other fees even if your home appreciates during the time you live there. *Investopedia
  • 7% The average amount U.S. home prices rose over the five-year period ending December 31, 2017. Just remember: You would have needed to be in the same home for all five years. Appreciation is not an annually reliable event although real estate does nearly always appreciate over the long term. *FHFA House Price Index
  • $9,080 The average amount a U.S. homeowner will spend annually on home-related expenses other than their monthly mortgage. Just remember: This breaks down to an extra $757 a month on home-related costs, and only about $3,000 worth are “avoidable,” insofar as landscaping, for example, is avoidable. *Zillow & Thumbtack
Categories | Article | Market & Trends
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