House hunting? Don't forget the hidden costs of owning a home, including utilities, taxes, insurance and repairs.
A home is the biggest investment you’ll ever make — and before you begin house hunting, you need to understand exactly how much house you can afford. After all, unlike renting, homeownership comes with additional costs beyond the down payment and monthly mortgage bill.
Using data from the U.S. Census’ American Housing Survey, we calculated the hidden costs of homeownership — including utilities, real estate taxes, property insurance, maintenance and repairs — in 54 major metro areas as well as every U.S. region.
Surprisingly, it turns out these costs vary widely depending on where you live. When it comes to housing expenses, how does your city or region stack up? We’ve got all the answers — as well as a customized calculator so you can add up hidden home costs in your area.
Want to find out exactly what types of added fees you may incur as a homeowner? Enter your mortgage details as instructed (home value, loan amount, term and interest rate), and select the metro area or region closest to you. The calculator will total your monthly, yearly and life-of-loan costs. You’ll also get a breakdown that estimates all of these “hidden” fees, including trash collection, repairs and fuel costs.
Mapping Homeownership Costs
We crunched the numbers to determine which cities and regions are the priciest for homeowners based on all home costs: mortgage, utility costs, real estate taxes, property insurance, maintenance and repairs. Across the United States, costs vary greatly. Cities along the West and East Coasts are among the most expensive, and virtually all of the most affordable spots are located in the eastern half of the country.
The six priciest cities are located in California. Based on real estate costs alone, housing in the Golden State is among the most expensive in the country. A 2015 report by the Legislative Analyst’s Office, a nonpartisan office which provides fiscal and policy information and advice to the California Legislature, revealed that the average home in California costs 240 percent more than houses in the rest of the U.S. In the top spot San Jose, median monthly costs top $2,400. After California comes Northern New Jersey, followed by a handful of major cities: Washington, D.C., New York City, Boston and Seattle.
The most affordable cities, located predominantly in the South and East, tend to be smaller and less flashy. Pittsburgh is the cheapest city, averaging $796 per month in home costs — one-third as much as top spot San Jose. Birmingham, New Orleans and Buffalo are similarly affordable. Housing-related costs play a big role in affordability, but it’s also important to consider each location’s average wages.
How Salaries Stack Up
We gauged each location’s affordability by comparing housing costs with annual income. How do U.S. cities measure up? Oklahoma City is the most affordable, as average income comprises only 16 percent of housing costs. Numerous cities in the South and East tie for second place at 17 percent, including Birmingham, Buffalo, Houston and Louisville.
Again, California tops the charts for most expensive housing. In first-place Riverside, housing costs command an average of 28 percent of income. L.A. comes in second at 27 percent, followed by five more California cities. Also relatively expensive are Miami, New York City and Northern New Jersey.
The numbers paint an interesting picture. For instance, Memphis, Phoenix and Miami have median housing costs on the low end — but the low salaries still make the cities relatively expensive. On the flip side, Washington, D.C., has pricey housing and high salaries to match, which makes it comparatively affordable.
It’s vital to ensure monthly housing costs leave enough left over for other necessities, such as food and health care. However, this cost analysis doesn’t paint the whole picture. A paper published by University of Michigan economist David Bieri asserts that quality of life should also factor into the affordability equation. For example, you may live in a city where your income comprises a fair chunk of your housing expenses — but if you enjoy other benefits, such as excellent public schools or a top-notch public transit system, the costs may even out.
Mapping U.S. Utility Bills
Along with the mortgage, utility bills represent one of the largest proportions of total housing costs. While the term may bring to mind simply electricity costs, there’s more to it than that: Depending on where you live, utility bills may refer to natural gas, water, trash pickup and other fuel costs (such as propane or oil, depending on a home’s age and heating type). And these costs add up quickly.
Utility costs vary widely. Overall, the South — especially parts of Texas, Alabama and Tennessee — sees the highest electricity costs, primarily due to higher temperatures that require air conditioning. Trash pickup and water are also especially expensive in certain areas of Texas compared with other states, while Rhode Island has the priciest natural gas.
The Cost of Home Repairs
Many aspiring homeowners underestimate — or simply fail to consider — the potential costs of necessary home repairs. Not only can repairs be vital to the safety and comfort of your family (think repairing a broken furnace in the dead of winter), but they also ensure your home maintains its value.
One common rule of thumb: Calculate monthly repair costs by taking 1 percent of your home’s value and dividing it by 12. Major repairs, such as replacing the roof or painting the home’s exterior, may occur infrequently — but they can command many months’ worth of repair budgets.
If your home needs repairs, it’s important to do your research and shop around to ensure you’re hiring an expert who is both trustworthy and within your budget. One option is to hire a handyman, who can tackle various repair tasks around the home. You can also turn to Angie’s List to find a pro who can handle virtually any home repair, including fixing a tile floor, repairing a leaky faucet, or performing various repairs to bring your home up to code.
The Cost of Maintenance
Unlike home repairs, home maintenance tasks focus on preventing issues and preparing for the future rather than fixing what’s broken. Median costs of maintenance vary widely by location. Overall, the Northeast carries the heaviest burden, with New York City and Boston home to the highest costs in the country. The South and Midwest fall in the middle in terms of maintenance costs, while Western cities like Phoenix, Las Vegas and Portland are the most affordable.
Homeowners generally perform different types of maintenance in the fall, winter, spring and summer. You can tackle some types of maintenance yourself (such as cleaning the gutters), but other chores are best left to the pros. On Angie’s List, you can find a trustworthy person who can clean and inspect your chimney, inspect and maintain your roof and perform landscaping.
Mapping Property Tax Costs
The largest disparity in monthly housing costs across the United States is in real estate taxes. Taxes in the most expensive spot, Northern New Jersey, average $643, nearly 12 times higher than last place Birmingham’s $54 tax. Other cities with high taxes include New York City, Chicago, Hartford and Boston. On the low end, New Orleans, Louisville and Oklahoma City follow Birmingham.
Because property taxes are rolled into mortgage fees, some homeowners don’t take much notice. However, for people in many areas, they cause controversy. In Dallas, for instance, some homeowners are fighting the city over property tax assessment increases (up an average of 12 percent) that sent taxes skyrocketing.
Planning for the Costs of Homeownership
Before you embark on the exciting journey of homebuying, it’s important to look beyond the initial costs and consider the monthly expenses you’ll need to pay. After all, no matter how much you love a home, if the monthly costs cause you to skimp on groceries or forgo favorite activities, you will regret the purchase.
Before you even begin house-hunting, you should calculate expected costs in your area so you can better hone your homebuying budget. You should also formulate a clear budget for repairs and maintenance (as well as plan for emergency home repairs) to minimize unpleasant financial surprises. Armed with knowledge and a well-thought-out budget, you can focus on what matters most — living happily ever after in your new home.
All data compiled from the American Housing Survey from 2013 and 2011. We analyzed all of the median housing costs data for major metropolitan areas and regional locales. We then calculated monthly repair costs by taking 1 percent of home value and dividing by 12. Metro areas where fewer than 10 percent of survey respondents used natural gas were omitted from the list of cities.
Project sources:http://www.census.gov/programs-surveys/ahs/data/2013/ahs-2013-summary-tables/metropolitan-summary-tables---ahs-2013.html http://www.census.gov/programs-surveys/ahs/data/2011/ahs-2011-summary-tables/ahs-metropolitan-summary-tables.html http://budgeting.about.com/od/budget_home/a/How-Much-Should-You-Budget-For-Home-Maintenance-And-Repairs.htm
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