Homeowners Struggle Under Higher ‘Phantom Costs’

A sign in front of a home for sale in San Francisco on May 11, 2023. Justin Sullivan / Getty Images

Many Americans are now regretting buying a home as they struggle to afford unexpected expenses.

U.S. households have grappled with painful financial issues in the real estate market for the last few years, from surging home prices to rising interest rates. At the same time, chronic inflation has made other aspects of homeownership more expensive, creating what industry experts say are “phantom costs.”

These long-term expenses go beyond the initial upfront investments. They include maintenance and repairs, property taxes, monthly utility bills, insurance, and homeowners association fees.

While this has been a fixture of homeownership, Ramit Sethi, the host of Netflix’s “How to Get Rich,” recently reignited the conversation about these hidden costs.

“Are you guys ready to listen about Phantom Costs now,” he asked on social media platform X when sharing a story about a homeowner whose costs have surged in three years.

Dollars and Cents of ‘Phantom Costs’

Various factors have fueled current conditions in the U.S. real estate market, from years of underbuilding to the Federal Reserve’s pandemic-era, ultra-low interest rates.

The median home price is about $419,000, according to Redfin data, while Freddie Mac shows the average 30-year, fixed-rate mortgage at slightly below 7 percent. Assuming a 20 percent down payment and a 6.85 percent mortgage rate, a monthly mortgage payment in today’s market is about $2,800.

Experts say this only scratches the surface of what homeowners will spend on their properties.

In June 2024, Bankrate crunched the numbers and concluded that the average annual cost of owning and maintaining a single-family home is more than $18,000, up 26 percent from 2020.

Nearly every aspect of owning and maintaining a residential property has gone up. Insurance premiums have surged approximately 40 percent, says Bankrate.

“Insurance costs are another factor squeezing homeowners,” the report said. “Annual premiums have been soaring, driven by rising home values, increasing construction costs, and natural disasters.”

A recent NerdWallet analysis determined that homeowners insurance costs an average of more than $1,900 per year, or approximately $160 a month.

A December 2024 Intercontinental Exchange study found that home insurance and property taxes account for a larger share of homeownership costs. Taxes account for nearly 23 percent of monthly costs, and insurance can represent more than 9 percent.

WalletHub, using Census Bureau data, estimates that the average U.S. household spends nearly $3,000 per year on property taxes.

Rocketing utility bills have also increased costs for households nationwide in recent years.

Electricity costs have risen about 32 percent since 2020, government data show. Last month, the National Energy Assistance Directors Association projected that seasonal home heating costs would rise nearly 9 percent to an average of $941 this winter. Estimates vary, but according to Home Guide, the average water bill in the United States is $49 per month.

“Everything has gotten more expensive in the past four years,” the Bankrate report stated.

Regret, Affordability Challenges

For decades, a cornerstone of the American Dream has been homeownership. But in today’s economy, it could be an albatross for many households.

According to a recent survey by Real Estate Witch, more than two-thirds (69 percent) of respondents say they have regrets about buying a home because of the financial pressures of ownership and the unexpected costs. Almost a quarter (24 percent) say homeownership has negatively affected their finances.

A townhouse for sale in Elkridge, Md., on Sept. 27, 2024. Madalina Vasiliu/The Epoch Times

The report further highlighted that 81 percent say homeownership costs are higher than expected, and nearly half (44 percent) think it is easier to be a renter than a homeowner.

As a result, 48 percent of all owners and 59 percent of owners who purchased after 2020 “would have taken a different approach to the home-buying process had they known the actual cost of maintaining their property,” researchers said.

In the last few years, a plethora of surveys have indicated that many Americans—homeowners and non-homeowners—are struggling with housing affordability.

Last month, a study shared with The Epoch Times found that nearly half of Americans think it is unrealistic to buy a home this year. According to findings from IPX1031, a Fidelity National Financial Subsidiary, 47 percent cannot afford to buy a home in 2025.

It also found that 65 percent are concerned about the U.S. real estate market. Their top worries are about rising home prices (34 percent), interest rates (22 percent), and tax rates (7 percent).

This past spring, the National Association of Home Builders determined that 49 percent of U.S. households cannot afford a $250,000 home.

According to an April 2024 Redfin report, close to 40 percent of homeowners believe they would be unable to afford to purchase a home in the current climate.

The new administration has pledged to restore housing affordability, a key issue for many voters heading into the November presidential election.

In the opening week of his second term, President Donald Trump signed an executive order directing all heads of executive departments and agencies to “deliver emergency price relief” that includes reducing the cost of housing and expanding supply.