Benefits of Being Locked In – Resiliency
Research shows the timing of a home purchase plays a significant role in an owner’s ability to weather the increasing hidden costs of homeownership.
ORLANDO, Fla. — Owning a home can be an expensive endeavor. In addition to monthly payments to service the loan, there are hidden costs of ownership, including property taxes, insurance, maintenance, electricity, internet and cable bills. The Hidden Cost of Homeownership Study by Bankrate calculated these costs in 2024 to $18,118 a year for a typical single-family home (valued at $436,291 per Redfin) in all 50 states, excluding the District of Columbia. That sum translates to an additional $1,510 per month on top of a mortgage payment – an estimated 26% increase since 2020.
In Florida, which carries higher than national average insurance premium costs, the average annual hidden homeownership cost in 2024 is $19,182, up 33% from 2020. While our total costs run below the more expensive states such as California, Massachusetts, New Jersey and New York, the percent increase between 2020 and 2024 is among the highest, standing alongside other formerly affordable places like Utah, Idaho, Montana and Tennessee.
The timing of a home purchase plays a significant role in a homeowners’ ability to weather the increasing hidden costs of homeownership. For those who purchased between January 2018 to December 2020, the typical mortgage based off the median sale price and interest rates at that time was approximately $1,003 and hidden costs were approximately $1,203, putting a total cost of ownership at $2,206. Even as hidden costs rise to $1,599 in 2024, the total cost of ownership is still relatively low at $2,602, approximately an 18% increase.
However, for those who purchased from January 2021 through November 2024, the estimated mortgage based on median sale price and interest rates at that time is estimated to be $1,812. Coupled with the higher hidden costs, the total cost of ownership is approximately $3,411. The change in the mortgage amount from 2018-2020 and from 2021-2024 is an 81% increase, whereas the increase in hidden costs was only 33%.
For those who locked in when rates were lower, their ability to withstand the other increases of ownership is greater. Based on closed sales, there are approximately 12,000 more people in this category than those in the more vulnerable higher cost categories. Additionally, owners who purchased before 2018 but refinanced when interest rates were lower are another group more likely to withstand the increasing costs facing all homeowners today.
Beyond the lower monthly payment, homeowners who have owned since 2018 have experienced a phenomenal rise in property values, pulling in significant equity gains over the years. While this may not translate to cash directly, it does often create a perception of greater spending power. Realistically, strong equity provides homeowners with a cushion in the wake of potentially impactful economic situations including job loss, major illness or other expenses.
Jennifer Warner is an economist and the Director of Economic Development for Florida Realtors®.
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