Zillow raises red flag on homeownership costs, mortgage rates

Much attention has been paid recently to American consumers' concerns about affordability.

High on their list of worries are health care, with insurance and medical bills consuming a significant portion of their income, as well as food, because grocery costs remain high.

Other everyday essentials, such as utilities, transportation and child care are also burdensome for working families.

Regarding inflation, the U.S. Bureau of Labor Statistics reported on Oct. 24 that the Consumer Price Index (CPI) for all items rose 3.0 percent over the previous year.

Related: Dave Ramsey bluntly speaks to homebuyers in tough housing market

Importantly, real estate technology company Zillow emphasizes that affordability concerns are particularly acute when it comes to the high costs of homeownership.

"A new analysis from Zillow and Thumbtack shows that the hidden costs of owning a home now total $15,979 per year nationwide," Zillow wrote.

"Rising expenses for maintenance, insurance, and property taxes are climbing faster than household incomes, reshaping what it truly costs to own a home in today’s market."

Zillow warns Americans on homeownership costs

Homeownership remains a significant cornerstone of financial stability, Zillow explains, but the continuing costs of home maintenance are increasing faster than income.

"In a market defined by high mortgage rates and limited housing supply, understanding these hidden costs is critical for anyone planning to buy or keep a home," Zillow senior economist Kara Ng wrote. "Knowing the full financial picture helps buyers make informed decisions and prepare for the real cost of owning a home in today’s market."

Zillow lists homeownership costs

• Homeowners typically face annual maintenance costs averaging $10,946, adding a significant burden beyond their mortgage.
• Insurance premiums contribute another $2,003 per year, further increasing the overall expense of owning a home.
• Property taxes average $3,030 annually, representing a steady financial obligation for households.
• Combined, these expenses exceed $1,300 per month in additional costs outside of mortgage payments.
• Over the past year, these costs rose by 4.7 percent, outpacing the 3.8 percent growth in household incomes.
• For many families, this gap has tightened budgets and made the prospect of homeownership increasingly difficult to afford.

Zillow: Mortgage rates sideways after Fed interest rate cuts

Zillow reported on Nov. 12 that the 30-year fixed mortgage rate was 6.08%. The 15-year fixed mortgage rate was 5.63%

"Mortgage rates initially rose following the Federal Reserve’s October meeting, where Chairman Jerome Powell announced a cut to the Fed Funds Rate but emphasized that another cut in December was not guaranteed," Zillow wrote. "Since then, rates have largely moved sideways."

The small mortgage rate relief experienced in September and October encouraged both buyers and sellers to pay attention, causing stronger-than-expected housing market activity, Zillow clarified.

More on homebuying:

• Zillow warns Americans on housing market, mortgage worry
• Berkshire Hathaway HomeServices explains housing market changes
• Fannie Mae forecasts mortgage rate shakeup

"However, affordability remains a significant constraint for homebuyers," Zillow wrote. "Although home values have declined in roughly half of major metro areas over the past year, prices remain well above pre-pandemic levels."

"Still, for financially prepared buyers, this time of year can be a sweet spot," Zillow added. "There’s often less competition than in the spring and more time to make sure the home’s a perfect fit."

"Sellers who stay in the market into the holidays may be more open to negotiating."

Coastal metro areas experience higher costs

• In coastal cities where housing is already costly, the added expenses of ownership rise even further.
• Homeowners in New York City face average yearly costs of $24,381 beyond their mortgage payments.
• In San Francisco, these additional expenses total about $22,781 annually for property owners.
• Boston households encounter roughly $21,320 in yearly costs on top of their mortgage obligations.
• These figures compound some of the nation’s highest mortgage payments, intensifying affordability challenges in major metropolitan areas.

Urban home insurance costs rise vs. income

Insurance premiums in metro areas are among the costs increasing at the quickest pace for homeowners, Zillow reports.

• Homeowners in Miami now face average annual insurance costs of $4,607, marking a 72 percent rise over five years.
• Jacksonville, Fla. has experienced the same 72 percent increase in premiums, while Tampa saw a 69 percent jump.
• Orlando households have dealt with a 68 percent climb in insurance costs during the same period.
• Beyond Florida, premiums surged 79 percent in New Orleans, highlighting severe affordability pressures.
• Sacramento, Calif. recorded a 59 percent increase, Atlanta rose by 58 percent, and Riverside, Calif., climbed 56 percent.

"These increases have far outpaced income growth, creating new challenges for first-time buyers and long-time owners alike," Zillow wrote.

Related: Redfin sends strong message on mortgage rates