Home Insurance, Property Taxes Account for Record 32 Percent of Average Mortgage Payment: Report

A 'For Sale' sign in front of a home in Arlington, Va., on Aug. 22, 2023. Andrew Caballero-Reynolds/AFP via Getty Images

A new study found that home insurance and property taxes account for a record share of homeowners’ monthly mortgage payments.

Home insurance costs have surged by about 5 percent since January 2023. Natural disasters, ballooning repair costs, and growing industry consolidation drove the increase.

With soaring property values, growing populations, and struggling government funding, monthly property tax bills have risen by nearly 30 percent over the past five years, to a monthly median of $250, according to a report by Redfin. In addition, they have jumped in 48 of the 50 most populous metros.

Put this together, many homeowners are dedicating more of their finances to insurance and property taxes than their mortgages, according to a new study conducted by Intercontinental Exchange.

The report concluded that, through July, 32 percent of average single-family house mortgage payments went to home insurance.

This is up from 31 percent in 2023 and represented the highest ever since the data series began in 2013.

Taxes and insurance, respectively, make up 22.9 percent and 9.4 percent of average monthly mortgage payments.

The research was based on borrowers relying on escrow accounts to cover their insurance and taxes as part of their monthly mortgage payments.

Across the country, insurance and taxes account for more than half of monthly mortgage payments for 9 percent of single-family mortgages, up from less than 4 percent a decade ago.

Overall, the study noted that the average monthly mortgage payment —principal, interest, insurance, and property taxes—reached an all-time high of $2,070 this past summer. This is up by more than 7 percent, or $140 per month, from a year ago.

“Even accounting for rising incomes, it now requires ~30.7 percent of the median monthly U.S. household income to make the average mortgage payment, the highest relative share since June 2015,” the study authors said.

Property taxes have outpaced insurance premiums in various parts of the United States. For example, property taxes represent more than a third of the average mortgage payment in Rochester and Syracuse, New York.

Conversely, many areas reported property insurance accounting for one-quarter of monthly payments.

“Property insurance not only accounts for a higher share of monthly mortgage obligations in obvious places, like Florida, and along the Gulf Coast, but also in areas like Oklahoma City, Wichita, and Tulsa, where tornado and hail risk is higher,” the report stated.

Many homeowners are choosing to avoid obtaining home insurance amid elevated costs. Last year, nearly 14 percent of homeowners reported living without home insurance. The Census Bureau number was higher in many communities across Florida, with as many as one-quarter of uninsured homeowners in 2023.

Higher premiums could raise the risk of delinquency for households with home insurance. A November paper by a group of economists titled “Climate Risk, Insurance Premiums, and the Effects on Mortgages” found that higher insurance premiums can bolster the odds of mortgage delinquency.

With exacerbated natural disasters, the economists said, “homeowners’ insurance premiums are rising dramatically,” impacting “the stability of the financial system.”

Clean-up efforts after Hurricane Helene are underway in Asheville, N.C., on Oct. 6, 2024. John Fredricks/The Epoch Times

While delinquencies are far below levels observed during the global financial crisis of 2008–09, they have risen amid a high interest rate environment.

The national delinquency rate is up by 5.1 percent from last year, the ICE study reported. Serious delinquencies (90 days past due) rose by 3.3 percent to a six-month high.

“Given that growing pressure, especially among more recently originated loans, it’s no surprise mortgage delinquencies are slowly beginning to edge higher,” the report said.

A Snapshot of the US Housing Market

Housing affordability has remained elevated, even as the Federal Reserve cuts interest rates and supply gradually improves.

Mortgage rates are down from their peak of 7.79 percent in October 2023, but they have been climbing in recent months.

According to Freddie Mac’s Primary Mortgage Market Survey (PMMS), the average 30-year fixed-rate mortgage was 6.85 percent for the week ended Dec. 26, up by 77 basis points from September.

“For the most part, mortgage rates have moved between 6 and 7 percent over the last 12 months,” Sam Khater, chief economist at Freddie Mac, said in a report. “Homebuyers are slowly digesting these higher rates and are gradually willing to move forward with buying a home, resulting in additional purchase activity.”

In the second half of 2024, U.S. housing market activity has been mixed.

According to the Census Bureau, new home sales increased by 5.9 percent in November, following a significant drop of 14.8 percent in October.

National Association of Realtors data showed that existing home sales rose by 3.4 percent and 4.8 percent in October and November, respectively. However, they tumbled by 2 percent and 1.3 percent in August and September, respectively.

Data from real estate-trading platform Parcl Labs highlight an imbalance between national demand and home listings of 33.8 percent in December, down from 40.3 percent in November. However, the imbalance is more expansive in many metropolitan areas, such as Dallas, Texas (58.3 percent); Albuquerque, New Mexico (51.7 percent); and Lakeland, Florida (50.7 percent).

Recent data from Redfin indicate that the median sales price is $429,971, reflecting a 5.4 percent increase from the previous year.