Conventional wisdom says homeownership is your ticket to building wealth , so it’s no surprise that around 57% of Americans feel pressured to buy a home.
But is homeownership all it’s cracked up to be? This question has sparked increasing debate over the past several years.
There's a huge cost issue with homeownership that many believe doesn’t make it worth it anymore. Here are 14 of the biggest downsides to consider before purchasing a home.
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1. HOA fees can be high
Over a third of homeowners live in an HOA community, paying an average of $291 per month in HOA fees.
That’s an additional $3,500 per year on top of your mortgage, taxes, insurance, maintenance, and other fees. You may find yourself needing to make extra money to pay for ownership costs.
Own a car? Here's 7 warning signs you're paying too much for car insurance. 2. You’ll need to save for annual maintenance costs
Experts recommend saving around one percent of the total purchase price of your home per year for maintenance costs. For example, a $300,000 home would require $3,000 per year in savings.
In a rental, you can expect to cover minor expenses — like a scratched wall or chipped paint — with your security deposit. Your landlord will likely cover routine maintenance expenses, though.
3. Appreciation isn’t guaranteed
Appreciation — or the value of property increasing in value over time — is touted as one the most compelling reasons to purchase a home. However, appreciation is often overestimated and isn’t guaranteed.
According to the Journal of Housing Economics, homeowners overestimate the appreciation of their homes by 8%. In April 2023, home prices were down 4.2% but were up by 4.8% by March, showing the inherent volatility of the housing market.
If you plan to buy a home and hold onto it for a long period of time, it might be a wise investment. But in the short term, it might not garner the returns you expect.
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4. Most people regret the expense
According to a 2022 study by Hippo, 78% of homeowners have had regrets about purchasing a home within the previous 12 months.
Respondents cited misunderstanding the expenses related to owning a home, having too many unexpected issues arise, and dealing with too much maintenance and upkeep as points of frustration.
5. Property taxes are a hefty cost
Many homeowners believe that property taxes are more expensive than they initially thought. In 2024, homeowners will spend an average of $2,971 on property taxes.
However, this expense can vary drastically based on your location. For example, a $500,000 home in Dallas, Texas, can cost you around $8,568 per year in property taxes alone, but it would be much less in Nevada.
6. Repairs are all on you
When renting, damage that you don’t cause is typically covered by your landlord. However, when you own a home, that expense is completely your responsibility.
Some unexpected expenses — like a flood damaging the drywall or broken furniture from an earthquake — can leave you spending thousands of dollars on repairs you weren’t expecting.
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If you’re loyal to a specific location and can't imagine yourself leaving, purchasing a home there might be a solid decision. Otherwise, it can leave you stuck in a single location for longer than you’d like.
If you desire something new, accept a job in another city, or want to move for any other reason, you’ll need to embark on the journey that is listing and selling your home.
With a rental, it’s easier to simply break or finish off your lease, pack up, and move on to greener pastures or move on to a little variety.
8. Free time is taken by repairs and maintenance
Mowing the lawn, trimming the shrubs, and organizing the garage isn’t everyone’s idea of leisure. But, if you purchase a home, much of your free time will now be dedicated to it.
Homeowners spend an average of 90 minutes per day on household activities, while renters spend just 67 minutes.
Over the course of a year, that’s over 141 hours, or around six days, that renters save. Just that time alone could allow you to spend more time with family or take on a new hobby.
9. The location might not be desirable
In the largest metro areas, at least 61% of renters can’t afford to purchase a home within the city.
Since costs tend to be cheaper in the suburbs, homes outside the city might be the only ones in your budget.
If you value living in the heart of the city, homeownership in the ‘burbs might not be ideal.
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10. You’ll likely need to take on debt
Many Americans use a mortgage to finance the purchase of their home. In 2022, the average mortgage balance was $236,443 — which is one massive loan to constantly be paying off.
Debt can cripple an individual if they fall on hard times. While real estate debt is considered a good thing, it might not fit your long-term financial goals.
11. You may lose access to amenities
Apartments often include various amenities, such as a swimming pool, fitness center, covered garage, and more.
If you purchase a home, it’s your responsibility to add those amenities if your home doesn’t already include them, or you’ll simply go without.
Given that installing an inground pool costs around $35,000 alone, adding the amenities you want might not be within the budget.
12. Your mortgage payment could change
Homeowners with fixed-rate mortgages will see consistent payments. However, if you have an adjustable-rate mortgage, your interest rate could change over time.
On a $320,000 mortgage loan with a 6.7% starting interest rate, just a 2% increase could increase your monthly mortgage payment by $441 per month.
That’s an additional $5,292 per year — not an amount that’s simple to find in your budget. Knowing what your rent will be for the next year might be more appealing.
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13. Homeowners insurance is expensive
Whether you rent or buy, it’s wise to purchase insurance. In most cases, however, homeowners insurance will be significantly more expensive than renters insurance.
With Progressive, a rough estimate shows that a renter’s insurance costs just $14 to $30 per month, but homeowners insurance can cost $81 to $138 per month or more.
With renter’s insurance, only a few factors impact the pricing: location, type of residence, insurance score, and coverage. With homeowners insurance, factors like pools, trampolines, pets, home businesses, and roof types can all increase the rate you pay.
14. It doesn’t always make sense for your stage of life
Purchasing a home might make sense if you’re looking to plant roots, have children, or retire in one area.
However, if you’re young, planning to relocate, or looking to travel, purchasing a piece of property could become a burden. You might consider getting a travel rewards card instead.
Bottom line
Homeownership can be a wise financial decision, but only if you believe the pros outweigh the cons. More and more people are starting to find renting to be the superior option
When you rent, your payments will be locked in and you won’t find yourself scrambling, which is especially important if you’re trying to move beyond living paycheck to paycheck .
The end benefit to homeownership also may not be as appealing as many believe it is, especially if the home isn’t owned for many years prior to a sale. However, only you can decide which path is right for you.
Money tips that can work for everyone
No matter what your bank account balance is, there's always an opportunity to optimize and improve your finances. Here's a quick checklist of things you can look at today.
Focus on paying off your debt . Debt can hold you back from making progress with your overall financial well-being. Aside from cutting expenses, there are tools that can help you pay off debt faster like balance transfer credit cards and debt counseling.
Earning extra income can give you breathing room. If finances are tight, earning some extra money to supplement your income can make a huge difference. A new job is one option to consider, but if you're not ready to make a big change or already retired, a part-time side job could be a better choice.
Cut your expenses. It sounds painful and so not fun, but it doesn't have to be. Take a look at your biggest expenses because that's where you'll probably find the biggest savings. For example, auto insurance rates have been soaring so shopping around for a new insurance company can be the fastest way to cut your bill. Also, look for ways to cut your grocery bill (despite rising inflation).
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