Photo: Robert Clark
There are many financial considerations homebuyers should weigh before committing to buy a home, like the dreaded downpayment and closing costs. But many less obvious costs could significantly add up to make a home no longer affordable depending on where you live.
In many expensive markets like New York City, hidden costs can add up to thousands of dollars yearly, according to a new report released earlier this week by Realtor.com.
“Hidden costs” of a home include property taxes, homeowners insurance, as well as monthly utilities. Homeowners often don’t consider how much their electric bill or cable bill is going to cost because they’re fixated on the larger mortgage payment, says Realtor.com.
Property taxes are the biggest expense post-buying many first-time homebuyers are not prepared for, says Realtor.com. And homeowners in pricier markets can expect to pay higher rates. Home insurance can vary greatly if your home is in an area prone to flooding (like New Orleans) or other natural phenomena.
To rank the top 10 US metros that had the highest hidden homeownership costs, Realtor.com analyzed property rates, average monthly utility costs and the average price of monthly home insurance in 100 of the country’s largest metro areas. It also factored in other often overlooked bills like repair and maintenance, pest control and general cleaning and housekeeping costs.
The New York metro area had the highest hidden costs of all the metro areas included in the study. New York has a property tax rate of 2 percent, or an average of $7,300 per year — way above the national average of $2,100, according to Census data. High property taxes can signal a hot market, says Realtor.com. New Yorkers can also expect to pay a hefty $234 per month average utility bill and about $80 on average per month on home insurance.
Bridgeport, CT and Boston, MA rounded out the top three. Connecticut, which had two metros in the top 10, has high property taxes. Bridgeport has a property tax rate of 1.7 percent, and the area stretches into other very expensive neighborhoods like Greenwich — “where hedge-fund managers and CEOs drop millions on real estate,” says Realtor.com. New Haven, CT, which ultimately ranked fifth in the study, has a property tax rate of 2.1 percent.
The other metros that made the top 10 were: Cape Coral, FL, Miami, FL, New Orleans, LA, Los Angeles, CA, Honolulu, HI, and Houston, TX.
And while these hidden costs will certainly give some homebuyers pause, buying is still more financially sound than renting in much of the country. But it is important to be prepared for the true costs of owning a home in your metro area.
Click here to read the entire report.