Recent economic shifts have created a new challenge for homeowners as rising property taxes and homeowners’ insurance premiums are catching many off guard. Homeowners with low-rate fixed mortgages are feeling fortunate in the face of rising rates for new mortgages, but the often overlooked costs of ownership are causing financial strain. The implications of these increases are significant and it is important for homeowners and prospective buyers to understand how they may impact their financial health and decision-making strategies.
Property taxes in the U.S. have seen a significant spike since the pandemic, with a more than 25% increase in median single-family home property taxes since 2019. This increase is largely due to the rise in real estate values, which have seen a 40% increase in median home prices from 2019 to 2023. This surge in property taxes can complicate plans for seniors looking to downsize as downsized locations have also seen a surge in value, coupled with higher interest rates, leaving seniors to grapple with higher tax bills.
Home insurance costs are also skyrocketing, with the average premium now around $2,511.25 annually. Seniors living on fixed incomes are particularly impacted by these rising costs, with projections indicating a further 10% to 15% increase in premiums. For homeowners in coastal areas, obtaining any property insurance has become a challenge as insurance companies have pulled out of these areas and canceled policies, further adding to the financial strain on homeowners.
These rising costs present an additional headwind for the real estate market, limiting eager buyers and stifling market activity. Few buyers had budgeted for or considered the possibility of a spike in these costs, which is impacting mortgage qualifications based on the ratio of income to PITI. With limited inventory and rising costs of ownership, homeowners are faced with a difficult decision on how to navigate the current housing market and their financial stability as renters may actually have more stability in comparison.
Despite the surge in home appraisals post-pandemic, the financial benefit of fixed living expenses is no longer guaranteed for homeowners, leaving many feeling stuck between a rock and a hard place. It is crucial for all individuals, whether they rent or own, to include all the costs of homeownership in their personal financial plans to ensure they are prepared for the financial implications of owning a home in today’s economic environment. As inflation continues to place additional burdens on households, homeowners must craft smart action plans to mitigate the growing financial strain of rising property taxes and homeowners’ insurance premiums.
