The day you close on your home, whether it’s your first or fifth, is always a happy day – almost as happy as the day your mortgage commitment is approved – but that’s just the beginning of homeownership.
As any homeowner can tell you, the expenses of owning a home in recent years have risen to the point where the mortgage payment, in spite of elevated interest rates, is frequently less than the combination of other monthly expenses.
Last week, we talked about insurance, and that, of course, is probably the biggest expense after the mortgage payment. Buyers should shop around for insurance quotes prior to committing to a property to purchase, especially in areas of the country like ours that are prone to natural disasters. According to the International Exchange, the cost of $1,000 of coverage in areas prone to hurricanes and wildfires is more than three times the national average.
Property taxes are also a large portion of your monthly carrying charges and can increase as the value of your property appreciates. In Florida we have homestead exemptions for full-time Florida residents, which lock in the value of your property, but this is not true in other regions of the country. This is one of the reasons why Florida still imports new residents from other parts of the country with much higher property rates. It’s also why so many Florida homeowners, many of whom have second homes here, convert to full-time residents.
For potential condo owners, association fees in the form of monthly fees and special assessments is a big-ticket item. The monthly fees are disclosed in the real estate listing, however, special assessments for storm damage or large repairs that haven’t been anticipated will likely be funded by special assessments that generally do not appear on the real estate listing.
Special assessments that have been approved by the board but not yet assessed to the owners will appear in the minutes of the board meeting from the date of the vote. However, there could be other discussions about potential assessments that are still in the decision-making stage that are also in the board of directors meeting minutes that will be important to a potential buyer.
Utility bills are frequently underestimated when budgeting; electricity, gas, oil and water bills are increasing yearly. Water bills are a special concern in Florida, especially during our dry season, and nationally, the average water bills are nearly $1,000 a year.
It goes without saying that routine maintenance is an ongoing expense when you purchase a property. You never really know when you might need to replace an appliance or take care of landscaping problems and heaven forbid the air conditioning/heating system decides to blow up during August. Zillow estimates that an average of about $500 a month should be anticipated for home maintenance, a number that smart buyers will allocate in a cash account.
You hear a lot of homeowners say, “We could never afford this house today,” and this is not their imagination. According to Redfin in January 2012 the household income required to afford the typical home in the United States was $39,223. As of November 2024, home buyers need to earn $126,764 annually to purchase the average home, a 223% increase.
Florida’s success as a retirement and relocation destination is threatened by the by-product of increased expenses. It’s not your parents’ Florida anymore; the bar has been raised for the good or bad.
