Homeownership costs in the US surged 26% since the start of 2020
Inflation has made homownership far more expensive
Housing must solve its supply problem to stop rising prices, analyst says
Madison Ventures managing director Mitch Roschelle analyzes the housing market and reveals some of the best places to live outside of big cities on 'The Big Money Show.'
The cost of owning a home in the U.S. has skyrocketed since 2020, putting a key tenet of the American dream out of reach for millions.
New findings published by Bankrate show the average annual cost for owning and maintaining a typical single-family home – not including mortgage payments – is $18,118. That marks a stunning 26% increase from just four years ago, when the same expenses totaled about $14,428 annually.
The calculation takes into account property taxes, homeowners insurance premiums, home maintenance costs and energy, internet and cable bills.
"Everything has gotten more expensive in the past four years," the report said.
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Homes in the Issaquah Highlands area of Issaquah, Washington on April 16, 2024. (Photographer: David Ryder/Bloomberg via Getty Images / Getty Images)
Chronic inflation has pushed up the cost of many homeownership expenses, particularly insurance premiums, which are up nearly 40% since 2019.
"Insurance costs are another factor squeezing homeowners," the report said. "Annual premiums have been soaring, driven by rising home values, increasing construction costs and natural disasters."
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Although high inflation has slowed, the price of most everyday goods is far more expensive than it was just a few years ago. On top of that, Americans are finding that their dollar just doesn't go as far as it once did.
Home prices have also spiked in recent years for several reasons.
Years of underbuilding fueled a shortage of homes in the country, a problem that was later exacerbated by the rapid rise in mortgage rates and expensive construction materials.
Homes under construction in Sacramento, California, on July 3, 2023. (David Paul Morris/Bloomberg via Getty Images / Getty Images)
Available home supply remains down a stunning 34.3% from the typical amount before the COVID-19 pandemic began in early 2020, according to a separate report published by Realtor.com.
Higher mortgage rates over the past three years have also created a "golden handcuff" effect in the housing market. Sellers who locked in a record-low mortgage rate of 3% or less during the pandemic began have been reluctant to sell, limiting supply further and leaving few options for eager would-be buyers.
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Economists predict that mortgage rates will remain elevated in 2024 and that they will only begin to fall once the Federal Reserve starts cutting rates. Even then, rates are unlikely to return to the lows seen during the pandemic. On top of that, investors are growing skeptical about the odds of a Fed rate hike this year given the string of hotter-than-expected inflation reports at the beginning of the year.
Photo of home for sale in Huntington, New York on Aug. 5, 2020. (Thomas A. Ferrara/Newsday RM via Getty Images / Getty Images)
Mortgage buyer Freddie Mac said Thursday that the average rate on a 30-year loan fell to 7.09%. While that is down from a peak of 7.79% in the fall of 2023, it remains sharply higher than the pandemic-era lows of just 3%.
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Most homeowners say they are nearly twice as willing to sell their home if their mortgage rate is 5% or higher, according to a separate Zillow survey. Currently, about 80% of mortgage holders have a rate below 5%.