Hidden Costs of Homeownership

A new analysis from Zillow and Thumbtack shows the hidden everyday costs of homeownership are higher than ever. Between unavoidable costs and essential maintenance, the average homeowner can expect to pay an additional $14,155 a year. 

That amounts to an extra $1,180 per month. Imagine a homebuyer looking at the monthly mortgage payment they can expect to pay on a typical home and then adding this amount to it. 

To be fair, renters pay additional costs, too—from renter’s insurance to utilities to cleaning/damage deposits. One thing they generally don’t have to factor into their monthly housing budget, though, is maintenance (other than cleaning and repairing any damage they’ve caused). They also typically pay less for some of their utilities.

First-time home buyers are already struggling with affordability challenges. And you, as the agent, can make them aware of these costs so they don’t jump into a home purchase simply because they can (barely) afford the mortgage payment. 

The first step is assessing what hidden costs your clients can expect to pay in your market. 

Hidden costs are highest in San Francisco—lowest in Las Vegas

Just as home prices can vary widely from one market to another, hidden costs are heavier in some metros than others. San Francisco has the highest at $22,791 a year, followed by New York and Los Angeles, both topping $22,000 a year. 

Among the 39 metros analyzed, Las Vegas had the lowest amount of hidden costs, with the typical Vegas homeowner paying $9,886 a year. Next up are Asheville, NC ($11,318) and St. Louis ($11,824). 

So, how do these hidden costs add up?

Unavoidable hidden costs + essential maintenance

The hidden costs single-family homeowners can expect to pay start with three unavoidable expenses:

1. Property taxes
2. Homeowner’s insurance
3. Utility payments—electricity, water, natural gas, internet, garbage/recycling pickup… 

These costs alone add up to an average of $7,742 nationwide, though some metros cost considerably more for one or more of them. 

For example, New York homeowners pay the highest property taxes at over $9,000 a year, while homeowners in Hartford, CT pay the most for utilities at an average of $4,443 a year.

Homeownership insurance costs vary based on a home’s value, so homeowners in more affordable metros like Pittsburgh and Cleveland pay considerably less than those in higher-cost markets like San Francisco and Los Angeles.

The hidden cost analysis also covered avoidable but necessary expenses, drawing from Thumbtack’s 17 essential home maintenance projects, which average a combined total of $6,413 a year—with higher costs in some markets than others. 

Los Angeles and Chicago had the highest annual maintenance costs at $8,639 and $7,722, respectively. At the other end of the spectrum, Las Vegas homeowners pay an average of just $3,467 a year on essential home maintenance. 

First-time buyers need to be prepared

Over half (55%) of successful homebuyers turn to real estate agents for financing advice. For first-time buyers, that figure jumps to 58%. And these hidden costs need to be part of the conversation. 

First-time buyers account for nearly half of all active homebuyers (45%) and are likely focusing on the monthly mortgage payment. As renters, they probably expect to pay for utilities but may have an unrealistic expectation of the amount—especially if their rent had some of those baked in (like internet, heating, and garbage/recycling collection). 

Share this information with your buyer clients (especially first-time buyers) so they won’t be caught off guard by these additional costs and find that the total cost of homeownership is more than they can afford. 

Home shoppers can use Zillow’s affordability calculator to determine how much they can afford in terms of monthly housing costs. 

From there, you can help them prepare for an appointment with a trusted mortgage lender to ensure they ask the right questions and understand not only what mortgage they could qualify for but also what they can comfortably afford on a monthly basis.

Once buyers have closed on a home, they can use Thumbtack to create prioritized home maintenance plans and receive personalized guidance on what projects to undertake, when to do them, and whom to hire if the project requires a professional. 

Another cost to keep in mind for homeowners with private septic systems is the cost of having the tank emptied every two or three years, depending on their usage. Private wells may also need to have their pumps replaced—and may also require a (new) water softener and whole-house filtration system to make the water drinkable. 

Using a service like Thumbtack can help homeowners stay on top of essential home maintenance—both indoors and outdoors—to ensure their home’s value continues to grow. 

Read the full press release for more details, including research methodology. 

Takeaways for real estate agents

If you’re working with first-time home buyers in your area, make sure they know of these hidden costs of homeownership so they can determine what mortgage payment they can truly and comfortably afford. 

You want them to be better off with their home purchase—not to find out a month or so in that they can’t afford all the additional costs that go with it. 

Go above and beyond the average agent to provide all the information your clients need to make decisions they fully understand and can live with for years to come.