Record inflation may have people questioning whether homeownership is still a good investment. Home prices have been rising faster than incomes, which can be a problem for homeowners because as the value of a home rises, so does the cost to maintain it. More than 1 in 4 homeowners with mortgages are considered "cost-burdened," meaning they spend more than 30% of their income on housing costs, according to a 2023 analysis of U.S. Census data by the Chamber of Commerce. "Unfortunately, a lot of people go into buying a home and they don't understand that their monthly payment could change," said Devon Viehman, regional vice president for the National Association of Realtors. Changes in two expenses in particular tend to surprise people, experts say. "What many [homeowners] have failed to anticipate is the rise in both property taxes — and that's correlated to the rise in the value of their home, something that at some level helps them — as well as the increased cost of paying for that insurance," said Mark Hamrick, senior economic analyst at Bankrate.
'Paper' wealth and rising expenses
Tips for homebuyers
Viehman of the NAR recommends people shopping for a home "lean on their realtor first." She recommends homebuyers ask their real estate agent for a history of costs associated with owning the home such as property taxes, insurance, trash removal, water, gas and electrical bills. Homebuyers should also see if the state they're looking to buy in has any laws restricting property tax increases per year.
Just because you qualify for $3,000 a month in a mortgage payment doesn't mean you should max it out right now ... Go a little lower than that so that you give yourself that room. Devon Viehman regional vice president for the National Association of Realtors
A good agent ought to be able to answer all those questions for you, Viehman said. Viehman also recommends leaving room in your monthly budget to address the possibility of surprise expenses. "Just because you qualify for $3,000 a month in a mortgage payment doesn't mean you should max it out right now," she said. "Look for something where you can get in around $2,500 if $3,000 is your comfortable budget. Go a little lower than that so that you give yourself that room."
