Why owning a home is so pricey ...

[SubieRubyRoo]

It is more than just interest rates and current home prices making homeowning a pricey challenge- taxes and insurance

It is really getting tough to own a home. The discussion often centers around the price of the home, and interest rates. Taking a back seat is often taxes and homeowners' insurance. The below chart is eye opening.

One has to wonder if homeownership in the U.S. will be on a steady decline. Maybe other forms of residences will be the new normal, like multi generations living in one residence (like most of the world), living in RVs, etc.



From Chuck Cowan:
A recent Wall Street Journal story highlighted how the percent of the average mortgage payment that is now going towards "property taxes and home insurance" is the highest it has ever been. This reality, combined with higher interest rates, has made home affordability much more difficult for far too many people. Property taxes rarely decline, and home insurance premiums don't appear headed for any meaningful decrease anytime soon. The direction of mortgage rates will have a significant impact on the affordability of homes for future buyers.
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I’m out in the middle of nowhere in Indiana. 25 minutes from the nearest Walmart and nearly 40 minutes from an actual grocery store. I moved in 2019; just over 1750SF, 24x30 garage, 16x30 barn, 3.25 acres. I locked in a refi at 2.25% (was originally 2.75%) right after CV-19 lockdowns. At the time my mortgage payment was a hair under $400/mo and insurance & property taxes combined was ~$140/mo. Fast forward thru the past 4 years (for many reasons) and I’ve had zero claims and zero changes to coverage… but now my home insurance ALONE is $298/mo. Propane heat & well water/septic kinda balance out but still is ~$250/mo when averaged over the full year (was $1.49/gal in 2019, $2.89/gal today). Electric bills, even though average monthly kWh & overall usage are essentially identical, have gone from <$100/mo in 2019 to over $190/mo today.

So in one 4-year period essentially, bad choices that are not under my control nor otherwise changeable by me have increased my monthly expenditures by nearly 100% when looking at the sum total, even with absolutely no changes in my circumstances. I can’t imagine how anyone who was on the edge of just scraping by in 2020 is still managing their circumstances today.

It’s clear that when some people say that by 2030 “we will own nothing” (not by our choice, of course) really mean it. This is unsustainable. Big, rapid, meaningful changes need to be made in 2025 and even that may not stave off the 2008-cum-1929 financial mess that appears to be materializing very soon.

 

[ArrestMeRedZ]

Exactly. You just have to know. Except AI can know everything, and a Dr. can never. Every study, every clinical trial. All the massive clinical trial databases will be loaded and regression run and the statistics calculated beyond anything any person can know.

So sure, you will still see a doctor, but doctors will be twice as efficient because all the inputs will already have been loaded and potential diagnosis made ahead of time, so you will need only 1/2 of them.

#3 niece, engineering degree from UT, masters from MIT. Really smart cookie. Diagnosed with melanoma twice (two separate incidents) by the time she hit her early 20s.
Based upon her own experiences, she decided to do a startup company that uses a cel phone camera and AI to diagnose skin conditions. Found it impossible to break into the profession so she realigned the company to work in conjunction with dermatologists on a referral basis. The app itself is now much more accurate than humans for diagnosis, but it's real value is getting patients in to see doctors in days rather than the months it usually takes. With the current laws it will never put doctors out of business, but it sure will help both patients and doctors in diagnosis and timely treatment when necessary.

 

[barryh]

Our home owner's insurance is $3872/year which covers building and contents (including earthquake risk), and liability. We live in an earthquake is possible area and the insurance for that alone, with a $75,000 deductible, is $2238/year.

That's seriously expensive insurance when we pay $150 a year but that reflects a near zero risk of floods, wild fires or earthquakes. I would say few people need to pay more than $400 a year for house insurance in the UK. The most common insurance claim is for water damage from leaking plumbing rather than floods although there are locations in the UK at significant risk of floods and the worst locations are effectively uninsurable for that risk.

 

[alarmguy]

It's a long time since I visited the US, perhaps 15 years ago when everything there seemed cheaper than the UK. Since then from what I'm reading here the cost of living in the US has gotten very much more expense.

To give you an idea of UK housing costs I'll show what I pay.

Our single story house is well above average in size at 2000 ft2 and in an expensive area. Value approx $1.05 million. The average house price in England is $386,000

Property tax $4350 per year. The average small house would pay half that and the biggest houses would pay a max. of $5300

Insurance $150 per year which covers building and contents. That's very much lower than average for the size of our house because of our age and because we are in a very safe area.

Don’t think a small sampling of people represents a huge country like the USA compared to a small UK.

The vast majority of people live very well here, all one has to do is work hard or move to place in the USA where they can afford a home. The size of the USA is vast and it still is the land of opportunity.
So much money floating around here others such as older relatives and parents give away money so young people do not have to move to other areas of the country where they can buy. If the money wasn’t available the prices would adjust lower.

Don’t you pay a 20% tax on everything you buy in the UK? (VAT TAX)

I fell there is no better place in the world than the USA where you are in control of your destiny and government doesn’t control you. I get tired of hearing how life is unfair.

 

[alarmguy]

I'm at $20K/yr for home taxes and insurance. Guess who's dropping home coverage!
My marketplace health plan is a brass tier cheapest plan, $12K/yr. Auto insurance is $8K. Dropping that too.

My wife totaled my truck at the end of May, Allstate has agreed to pay $5K less than it's worth. I still don't have a check. Dropping them once received. With those premiums and terrible treatment, why pay them?

Hope you are getting close to 65 years old, how much longer until you do?
Medicare is a wonderful system that works well. Tons of options, you can have full coverage health insurance for as little as $2,400 a year per person in Advantage or an incredible medigap plan with almost never a medical bill for less than $5000. Per person

Ps my sister in law and husband self employed live in NJ and pay $24,000 a year for health insurance once retired that will drop $20,000 to approx less to $5000 or so depending what options they choose.

This year for 2025 I switched into Medigap from Advantage but will one day go back to Advantage as I loved it.
. I’ll do a thread one day. My cost is under $350 a month for 2025. Very recently found out I will begin treatment for prostate cancer. My costs will be literally $0.00 or way less than $1000 for some of the best care in the country.

I’ll do a thread one day. I hate reading USA bashing in the greatest free country on Earth from some in here and wow am I glad to be here in the USA for what I am about to go through

 

[barryh]

Don’t you pay a 20% tax on everything you buy in the UK? (VAT TAX)

We do pay 20% VAT on most things but not on everything. In the context of this topic, these are some of the exemptions:

• financial services, investments and insurance
• property, land and buildings
• healthcare and medical treatment

Bottom line is that USA taxation is much lower at 27% of GDP compared the UK's at 37%. While that measure of taxation has risen in most countries, I despair that the UK is rapidly going down hill under an incompetent socialist government.

 

[Cujet]

Hope you are getting close to 65 years old, how much longer until you do?
Medicare is a wonderful system that works well.

sister in law and husband self employed live in NJ and pay $24,000 a year for health insurance

I'm 61, prior to retirement in May 2024, health ins was $35K/yr+ for wife and I. She's on MC now.

I've reduced my total insurance expenses (home/health/auto/medicare advantage for wife) to $36K/yr, soon it will be considerably less because I won't have any real coverage. I have no income and I am not well enough to do much. (autoimmune, muscles stop working, MCTD, it's like Lupus, and other issues)

I can drop homeowners and will do so. I can change auto plans to a cheaper company and reduce coverage to nil.

I've had Allstate for 40 years (home and auto), I've had one claim when my wife totaled the truck, a $12K payout. They've made a fortune off of me.

 

[Cropduster172]

I'm 61, prior to retirement in May 2024, health ins was $35K/yr+ for wife and I. She's on MC now.

I've reduced my total insurance expenses (home/health/auto/medicare advantage for wife) to $36K/yr, soon it will be considerably less because I won't have any real coverage. I have no income and I am not well enough to do much. (autoimmune, muscles stop working, MCTD, it's like Lupus, and other issues)

I can drop homeowners and will do so. I can change auto plans to a cheaper company and reduce coverage to nil.

I've had Allstate for 40 years (home and auto), I've had one claim when my wife totaled the truck, a $12K payout. They've made a fortune off of me.

I know a guy, retired school teacher who lives in Florida. His wife died two years ago. He sold her car and notified his carrier he had done so. He expected a premium reduction and was kind of shocked when they raised his auto premium. He told them he planned to drop them for his auto coverage. His plan was bundled with his homeowners policy. They told him drop the auto and they'll drop his homeowners coverage with it. Evidently homeowners coverage is challenging in Florida.Insurance seems to be a bigger problem in Florida overall.

 

[SwampSurvivor]

I know a guy, retired school teacher who lives in Florida. His wife died two years ago. He sold her car and notified his carrier he had done so. He expected a premium reduction and was kind of shocked when they raised his auto premium. He told them he planned to drop them for his auto coverage. His plan was bundled with his homeowners policy. They told him drop the auto and they'll drop his homeowners coverage with it. Insurance seems to be a bigger problem in Florida.

That happened to my mom when my dad died. She removed him from the car insurance and the rates went up

 

[tbm5690]

I think people need to be more willing to relocate. Not saying it's easy, especially if your family has been in the same area forever, but there may get to be a point where home ownership is predicated on moving to a lower cost area where there are jobs. This includes making sacrifices of other sorts, which I understand isn't for everyone. My point: I get the impression some throw around the word "impossible" too often with home ownership when they simply aren't willing to change the circumstances.

 

[Pablo]

GON. Stop worrying, be happy.

 

[Pablo]

You might be able to own your home but Uncle Sam will always own the land under it.

And the full safe in the home as well!!

 

[SC Maintenance]

I think people need to be more willing to relocate. Not saying it's easy, especially if your family has been in the same area forever, but there may get to be a point where home ownership is predicated on moving to a lower cost area where there are jobs. This includes making sacrifices of other sorts, which I understand isn't for everyone. My point: I get the impression some throw around the word "impossible" too often with home ownership when they simply aren't willing to change the circumstances.

This is good advice. I have moved multiple times. I lived in very expensive big cities, and fairly reasonable cost smaller towns. I learned a lot.

The problems are of course as you mentioned family - I was never going to live near family unless I wanted to be a farmer, so have always been alone - it was a non factor for me.

The other is jobs. Specific professions require you to work in certain places, and the best jobs are in the expensive areas.

However I agree. It makes no sense to be an insurance agent or electrician or IT specialist and live in an expensive city. You will never get ahead.

 

[Delta]

I think people need to be more willing to relocate. Not saying it's easy, especially if your family has been in the same area forever, but there may get to be a point where home ownership is predicated on moving to a lower cost area where there are jobs. This includes making sacrifices of other sorts, which I understand isn't for everyone. My point: I get the impression some throw around the word "impossible" too often with home ownership when they simply aren't willing to change the circumstances.

While you have a good point, this has caused issues in my area. When the height of C19 started the remote work "craze" it flooded my area with people looking for better property cheaper. Well, as you know this caused home prices in my area to go from affordable to just as expensive as where they left.

 

[eljefino]

I think people need to be more willing to relocate. Not saying it's easy, especially if your family has been in the same area forever, but there may get to be a point where home ownership is predicated on moving to a lower cost area where there are jobs. This includes making sacrifices of other sorts, which I understand isn't for everyone. My point: I get the impression some throw around the word "impossible" too often with home ownership when they simply aren't willing to change the circumstances.

Bravo, this is America where people have free will. You can't live in an apartment like "Friends" while working the jobs in "Friends." Actually, neither could they-- Phoebe inherited the rent controlled place from her grandma.

There are still plenty of MCOL and LCOL cities with good paying jobs. Many people live in friend/ co-worker circles that are crabs-in-a-bucket, keeping everybody from succeeding. Look past these chumps and set your own destiny, even if it means "starting over." Let me talk to someone bumming about their experience, within 30 seconds I can get them to say "but I don't wanna..."

 

[Dave Hess]

I’m out in the middle of nowhere in Indiana. 25 minutes from the nearest Walmart and nearly 40 minutes from an actual grocery store. I moved in 2019; just over 1750SF, 24x30 garage, 16x30 barn, 3.25 acres. I locked in a refi at 2.25% (was originally 2.75%) right after CV-19 lockdowns. At the time my mortgage payment was a hair under $400/mo and insurance & property taxes combined was ~$140/mo. Fast forward thru the past 4 years (for many reasons) and I’ve had zero claims and zero changes to coverage… but now my home insurance ALONE is $298/mo. Propane heat & well water/septic kinda balance out but still is ~$250/mo when averaged over the full year (was $1.49/gal in 2019, $2.89/gal today). Electric bills, even though average monthly kWh & overall usage are essentially identical, have gone from <$100/mo in 2019 to over $190/mo today.

So in one 4-year period essentially, bad choices that are not under my control nor otherwise changeable by me have increased my monthly expenditures by nearly 100% when looking at the sum total, even with absolutely no changes in my circumstances. I can’t imagine how anyone who was on the edge of just scraping by in 2020 is still managing their circumstances today.

It’s clear that when some people say that by 2030 “we will own nothing” (not by our choice, of course) really mean it. This is unsustainable. Big, rapid, meaningful changes need to be made in 2025 and even that may not stave off the 2008-cum-1929 financial mess that appears to be materializing very soon.

Imagine it being much more expensive in big town USA.

Folks on TV say ignore everything.

 

[PontiacHO]

Not to forget HOA fees.

 

[D60]

Not to forget HOA fees.

That's a choice. I fully support the people's right to privatize and rule their neighborhoods as they all agree to do so, but I'll never live in one. I also support people's right to have "just property" that is not part of an HOA

But don't buy in an HOA and then complain about the dues. You went into that eyes wide open -- or should have.

 

[Dave Hess]

I know a guy, retired school teacher who lives in Florida. His wife died two years ago. He sold her car and notified his carrier he had done so. He expected a premium reduction and was kind of shocked when they raised his auto premium. He told them he planned to drop them for his auto coverage. His plan was bundled with his homeowners policy. They told him drop the auto and they'll drop his homeowners coverage with it. Evidently homeowners coverage is challenging in Florida.Insurance seems to be a bigger problem in Florida overall.

Yeah, very pathetic the insurance companies do everything to screw their policy holders.

 

[IndyIan]

I think its a bunch of factors, my WAG, is there is too much money floating around in correlation with real goods available. Income inequality is also getting higher all the time, and more and more people are investing in real estate, having/hoarding multiple units, and all knowing that if the majority won't sell/rent low, none of them will have to. So prices and rents will stay high, until something catastrophic happens.
There are very affordable places in the US, but not that many jobs left there due to loss of manufacturing.

I think it would be a good experiment for a government to manage the annual building of 1% of the current housing supply in an area, in wartime style housing, or townhouses. Set up some rules so buyers have to live in them and investors can't buy them for 25 years, and see what happens. Basically make that area not a "good investment" prospect as the affordable housing supply will be close to demand. Change housing back to a place to live, vs an investment tool.

For people living in a shed, or paying 60% of their income to rent a terrible apartment, something like this would be very nice alternative to rent, and a reasonable investment that will keep up with inflation.