Homeownership costs in the US surged 26% since the start of 2020
How have the recent changes in mortgage rates compared to the lows during the pandemic?
The recent changes in mortgage rates have seen a significant increase compared to the lows during the pandemic. According to Freddie Mac, the average rate on a 30-year loan fell to 7.09% in 2024. This is down from a peak of 7.79% in the fall of 2023 but remains sharply higher than the pandemic-era lows of just 3%. Most homeowners say they are nearly twice as willing to sell their home if their mortgage rate is 5% or higher. Currently, about 80% of mortgage holders have a rate below 5%.
What role has chronic inflation played in the rising costs of homeownership, particularly in insurance premiums?
Chronic inflation has had a significant impact on the rising costs of homeownership, particularly in insurance premiums. Since the start of 2020, the average annual cost for owning and maintaining a typical single-family home in the U.S. has surged by 26%, reaching $18,118. This increase is attributed to factors such as property taxes, homeowners insurance premiums, home maintenance costs, and energy, internet, and cable bills.
Insurance premiums have seen a notable increase, with costs rising by nearly 40% since 2019. This surge is driven by rising home values, increasing construction costs, and the growing frequency of natural disasters. As a result, homeowners are facing higher insurance premiums as insurance companies adjust their rates to keep pace with inflation and other economic factors.
Inflation affects the cost of home insurance as it leads to an increase in the prices of goods and services over time4. This includes the cost of replacement for a home in case of damage or loss, which means insurance companies must adjust their rates accordingly4. Additionally, inflation impacts the cost of building materials and labor, further affecting the cost of insurance.
To mitigate the impact of inflation on home insurance premiums, homeowners can shop around for different insurance providers, compare pricing and coverage options, consider increasing their deductible, and maintain a good credit score. Keeping the home well-maintained and safe can also positively impact insurance rates.
How have property taxes, homeowners insurance premiums, and home maintenance costs changed over the past four years?
Property taxes, homeowners insurance premiums, and home maintenance costs have significantly increased over the past four years, contributing to the overall surge in homeownership costs in the US.
-
Property taxes: Property taxes have risen due to increased home values and inflation. The average annual property tax in the US is now $3,689, a 26% increase from 2020.
-
Homeowners insurance premiums: Insurance costs have soared, driven by rising home values, increasing construction costs, and natural disasters. Annual premiums have gone up nearly 40% since 2019. The average annual homeowners insurance cost is now $1,516.
-
Home maintenance costs: Home maintenance costs have also increased, with the rule of thumb being 2% of the home's value per year. For a typical single-family home valued at $436,291, this amounts to $8,726 annually.
These increases have led to the average annual cost of owning and maintaining a single-family home in the US to reach $18,118, a 26% increase from 2020.