Yahoo Finance Navigating the True Cost of Homeownership in Different Housing Markets
Buying a home is one thing and owning a home is another, depending on state to state, city to city. The upfront price of purchasing a house is only the start of the true cost of homeownership, a number that can change depending on the market where you are buying.
“Real costs are determined by factors like local regulations and utility costs,” said Daniel Rivera, the owner of Proactive Property Management. “For instance, energy-efficient appliances and solar installations … can reduce long-term energy bills. Selecting markets where you get these incentives can add value and reduce overall homeownership costs — an aspect often overlooked but crucial for true cost evaluation.”
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Missy Derr, a real estate advisor with Engel & Völkers, noted, “It is important to understand that your ‘initial costs’ associated with buying a home are not just limited to down payment or inspection costs or even the closing costs that make up attorney and lender fees plus escrows for taxes, HOAs and insurance.”
“The cost of homeownership continues past the day you wire all of your funds to purchase and pay your monthly mortgage; there are other factors to consider,” Derr explained. “An overlooked thing to be aware of is that the amount actually needed for property taxes may vary! Your first-year payments are based on previous tax years.”
“Property taxes can even increase years in the future due to property values rising. This can be mitigated by filing your homestead exemption promptly and arguing these increases, which will either cost you time or money, and sometimes both, if you hire a lawyer on your behalf,” Derr said.
Here is what goes into navigating the true cost of homeownership in different housing markets.
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New Jersey
Rivera agreed with Derr that the true cost of homeownership goes beyond the purchase price — it includes property taxes, insurance, maintenance and possibly HOA fees.
In New Jersey, specifically the city of Hoboken, “…property taxes can be around 1.6% of the home’s value annually. Home insurance averages $1,200 per year, and maintenance can vary, but generally plan for 1%-2% of the home’s value yearly for upkeep,” Rivera said.
Specifically, he highlighted that northern New Jersey “has nuances worth noting.”
“Jersey City’s ongoing development projects might lead to higher property taxes in the future, but the current incentives and lower initial property prices compared to Manhattan make it an attractive market,” Rivera explained. “Rental income here is also robust, often offsetting ownership costs significantly for investor-landlords.”
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Georgia
According to Derr, the average home buyer in Georgia spends between $26,788 and $92,697 when purchasing a $327,174 home — the state median value. Derr cited that different areas of America’s weather alone will determine the frequency of cost and maintenance on your home, adding to the cost.
“In Atlanta and the Southeast, our ACs are replaced much more frequently than our furnaces, which would be the reverse for those in the Northeast,” said Derr. “Our roofs even wear differently based on how much sunlight they receive and how stifling hot our attics get in the warmer months. Areas with colder temperatures usually use oil to heat their homes, while urban southern areas rely on electricity and gas!”
Ohio
The upfront costs, like the down payment, home inspections and closing fees, in a city like Columbus, “usually run about 2%-5% of the home’s price” said Dimitri Zubrich, a Re/Max Realtor. “Closing costs in Columbus generally range between 2% and 5% of the loan amount, which includes lender fees, appraisal fees and title insurance.”
“And let’s not forget the ongoing costs like maintenance and utilities that can chip away at your budget,” Zubrich said, adding that “with Columbus home prices rising, it’s essential to know all these costs before diving in.”
California
In a state that is not known for being cheap, major cities like San Francisco are even more expensive to buy, maintain and pay for a home.
“Property taxes and insurance there can feel like you’re paying an arm and a leg, because the property values are sky-high,” said Zubrich — the average property taxes paid by San Francisco residents are approximately 1.18%.
“This is equivalent to, at a $1.4 million median home price, an approximate annual property tax bill of $16,520,” added Ben Johnson, a real estate agent and the CEO of Big Ben. “It will also help to know that the cost of home insurance in such large areas is going to be about $1,000-$2,000 annually.”
“I’ve seen homeowners underestimate the maintenance costs, which can be 1%-3% of the home’s value every year,” reported Zubrich. “Throw in unexpected repairs and HOA fees, and you’ve got quite a hefty bill.”
Arizona
Emerging markets — such as Phoenix — are going to yield good deals, according to Johnson.
Johnson said, “Phoenix increased its housing inventory by 2.8%, so there are more choices available for buyers. Its property tax rate is approximately 0.72% and at $400,000 for a median home price, that equates to roughly $2,880 per year.”
Johnson noted that the typical home insurance in Phoenix will run $700 to $1,000 a year.
“With its growing economy and job market, combined with relatively lower costs of living even compared to up-and-coming markets,” Johnson continued, “Phoenix does offer a somewhat positive outlook for future homeowners.”
Texas
Texas has some pluses and minuses. On the plus side are the lower property taxes. On the minus side is the higher homeowners association fees, particularly when it comes to Austin, one of its most popular cities.
“A $400,000 home may come with $8,000 in property taxes, $4,800 in HOA fees and $1,000 in insurance,” said Jeffrey Zhou, CEO and founder of Fig Loans. “The growing market can offset costs with property value appreciation, as Austin’s currently booming tech industry can help drive demand in [and], over time, increase home values.”
New York
Across the Empire State, there are a lot of different costs that come with owning a house, whether you are in an apartment in the city or a full house upstate.
Zhou offered an example: “A $700,000 condo can incur $10,000 in property taxes, $7,200 in maintenance and around $1,200 in insurance annually. These add significantly to your mortgage payments.”
Also, Zhou highlighted that it’s important to factor in that New York City’s high cost of living can significantly impact overall affordability, versus somewhere like Buffalo where there are “lower home prices and reduced additional costs, offering opportunities for significant returns as these markets recover and grow.”
Buffalo is “experiencing revitalization and economic development, increasing their appeal and potential investment returns,” remarked Zhou.
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This article originally appeared on GOBankingRates.com: Navigating the True Cost of Homeownership in Different Housing Markets
