The Costs of Homeownership are Skyrocketing
Homeownership is getting less and less affordable – and not just for people trying to buy a home. Current homeowners are being squeezed, too.
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Full Transcript below:
00;00;00;00 - 00;00;28;21
Unknown
Welcome back. Thanks for joining us on 30 Minute Money. It's a podcast, delivers action oriented smart money ideas and bite sized pieces. I'm Scott Fitzgerald with Steve Wershing from Focused Wealth Advisors to give us the lowdown on the cost of homeowners and homeownership and all that stuff. That's right. We said that it was very fluid. It was. Yeah, it was very smooth.
00;00;28;21 - 00;00;52;24
Unknown
I can zero professional. I can tell the cost of homeownership, the costs of homeownership are skyrocketing. Yes they are. And we I it's just it's interesting that that you decided to cover this today because I was just having this conversation. we moved into the area in 2007, and we moved from South Florida. And that was just slightly after the big housing bubble in South Florida.
00;00;52;25 - 00;01;14;05
Unknown
It was actually kind of still going on, I think, in different places. And we were so excited that we were able to buy a house here, because in Florida it was absolutely impossible. Yeah. For a young family to buy a house. Yep. And unfortunately, that's getting to be that when it's getting to be that way. So I was first thinking, you know, was counting my blessings that we were able to, to get into into a house.
00;01;14;06 - 00;01;36;27
Unknown
Yeah. Well and I bring me I bring the topic up for two reasons. One is that if you are looking to buy a first house, if you're not in a house and you're looking to buy one, this is stuff that you need to know. because the price of the house is just the starting point. But I also wanted to bring it up because a lot of what's going on now is, is affecting people who who currently own homes.
00;01;36;29 - 00;01;57;08
Unknown
And this is stuff that you need to take into account when you're putting together your financial plan. Because if you don't plan for it, you could find yourself, you know, in a in a pickle financially. and so I wanted to cover this because this is something that definitely should be thought about when you're thinking about your cash flow over the next couple of years and planning out your finances.
00;01;57;11 - 00;02;19;07
Unknown
All right, let's jump in. So, you know, the the the dream of homeownership is alive. and, it's not the only way to go. there there are lots of lots of good, good reasons to rent. I'll just start with that. If you're looking to buy a home, especially if you're a first time homebuyer, don't rush into it.
00;02;19;10 - 00;02;35;11
Unknown
it's there. There are plenty of good reasons to rent, especially in a market like this. So I'll just. I'll just tell you, you know my story. My kids are grown and gone. They're out of town. They're not coming back. And, you know, so I've got this big old house and it's just me, and I've got a big old yard.
00;02;35;14 - 00;02;53;18
Unknown
And, you know, I, I was looking at what prices were doing on the real estate market, and I thought, I don't need all this to kick around. And, and frankly, you know, if somebody is willing to pay me more than the place is worth, maybe I should just let them. Yeah. And so, you know, a lot of people say, well, yeah, but then you got to live someplace.
00;02;53;18 - 00;03;13;05
Unknown
And that's entirely true. But I'm not buying a new place anytime soon. I sold my house, and I've got all that money in the bank, and I'm renting for a while, you know, while the market is nuts. And I've got, you know, I've got a rent that's at least stable for the next year. And all my utilities are included in it, and I'm good for a while.
00;03;13;05 - 00;03;45;22
Unknown
And when you know, if and when the real estate market regains his sanity, I may go back to it. But in this kind of an environment, it makes perfect sense in a lot of situations to just rent. but like I said, you know, these are things that will also affect homeowners. So I wanted to, you know, I wanted to go through some of those, but and just in terms of, buying a home, you know, the, the there have been lots of headlines over the past year that that home affordability is the lowest that it's been since the 1980s, that it as a proportion of your wealth and a proportion of your
00;03;45;22 - 00;04;03;10
Unknown
cash flow, just acquiring a home is higher than it has been in 40 years. And that makes it really tough. And one big reason is mortgage rates. You know, interest rates have gone up significantly like they were too low for too long, you know. So there are a lot of people who've got three and 4% mortgages out there.
00;04;03;12 - 00;04;20;22
Unknown
And you really don't want to get rid of those if you can help it. Yeah. but now if you go to buy a home, I mean, you're looking in the mid 70s, you know, to, to get a mortgage and that, that makes it way more expensive to do that in Rochester. Here, actually, a bigger issue is still the lack of inventory that there are just too few homes on the market.
00;04;20;22 - 00;04;43;27
Unknown
So every time a home goes on the market, it's a competitive situation. And when you're in a competitive situation, you're going to pay more than if it's not competitive. So that that pushes the price even higher. And until that, you know, now now their their house is being built, their apartment being apartment buildings being built. And so inventory is coming up online slowly, but it's coming up online.
00;04;43;27 - 00;05;07;21
Unknown
But for right now there's still a real lack of inventory. And that that means competitive bidding, higher prices, that kind of stuff. But the perverse, you know, outcome of that is real estate prices have been going up so much, so fast that assessments are going to be going up, too. And so the taxes that you pay on your property will be going up.
00;05;07;23 - 00;05;26;22
Unknown
because, you know, assessment, the idea of assessment is material, a periodic reevaluation of what a house is worth. And if, if, if the market is up and the house is worth more than you know you're going to pay, you're going to pay more in taxes on that. So so that part of it will be going up too.
00;05;26;24 - 00;05;56;17
Unknown
The other thing that's probably less recognized at the moment is that, home insurance premiums are skyrocketing. and that's because of things going on all over the country, floods, wildfires out west, storms in the south there. You know, the, the, the insurance companies that write homeowners are having a claims deluge. Yeah. And so yes. Yeah.
00;05;56;17 - 00;06;14;13
Unknown
And in Florida, for example, heaven help you if you own a home because there are just companies pulling out of the state. I've got a friend who's got a home in Florida, and he was just notified by his home homeowner's insurance company that they're just going to keep canceling his policy because they're not going to write in Florida anymore.
00;06;14;15 - 00;06;36;04
Unknown
That's it. Yeah. Have a nice day because you're almost guaranteed to have to to, you know, paying pay a claim. Exactly. It's all the storms that are happening every year. I mean, when I grew up in Florida. So as a kid, we, I, you know, there was a couple of storms here and there, but ever since, after, let's see, Andrew was the big 1 in 92.
00;06;36;07 - 00;06;54;13
Unknown
And then after that, in the 2000, the early part of the 2000 is just started increasing, increasing. And now it's like it's like five storms a year I've seen. Exactly. So but you know, those companies that got hit by that stuff. Well, they're going to try to spread that risk over all of their policyholders, not just in that state.
00;06;54;13 - 00;07;18;22
Unknown
So even if we don't have those big problems here in Rochester, we're probably going to still have to pay higher premiums. Yeah. Because of of things that are going on elsewhere. You know, competition will help keep that down. But chances are, you know, and heaven help you if you're planning on retiring to Florida because, you know, then you're then you're really going to be having a tough time trying to find homeowners insurance, but it's going to affect you here, too.
00;07;18;25 - 00;07;38;26
Unknown
and then on top of that, we've got consumer prices that are going up. So in addition to your the cost of maintaining your home, everything's getting more expensive. It was up three, 3.5% in March of this year over March of last year. So it's not going along as quickly as it was a year or two ago, thank goodness.
00;07;38;26 - 00;07;59;01
Unknown
But they're still going up. And that means that the little repairs that you have to make, the supplies you have to to buy for your house, all that kind of stuff, they're all going up in price too, so it's getting more and more expensive. and we're seeing that we're seeing those issues in, we're seeing those issues and now studies and surveys and that kind of stuff.
00;07;59;01 - 00;08;29;16
Unknown
So in the Wall Street Journal, there was an article that the tech company Clever Real Estate surveyed a thousand homeowners, and what they found was that 1 in 5 of those homeowners could not afford a $500 emergency repair without using credit cards that they would. They don't have any cash reserve. They would have to dip into credit cards to cover even a $500 repair, and 42% of those respondents said that they had skipped some home repairs because of the because they couldn't afford it.
00;08;29;20 - 00;08;46;08
Unknown
So they're they're they're deferring maintenance on their house because they can't afford to maintain the property. Just don't the guitar just don't use the garage door anymore. We can't use the garage. Exactly. Yeah, right. Exactly. Can't afford to get it fixed. That's right. We'll just leave it open all the time. You know? But that happens. Oh, yeah. Oh, I know it happens.
00;08;46;10 - 00;09;15;19
Unknown
It happens. Terrible. Fannie Mae, found that 10% of homeowners were not confident that they could afford continuing home insurance premiums because they're getting too expensive. And the company, thumbtack did a survey and found it or did a study and found that, maintaining a home per year, maintaining a home is now, about $6,600 per year, and that's up 8.3 over last year.
00;09;15;19 - 00;09;36;06
Unknown
Wow. 8.3%, I should say, over the last year. So, so it's not, you know, so it's it's, you know, it's it's really and then you've got on top of that because of all kinds of those situations, it's if you do need a repair, it's a lot harder to find a professional to do it. you might have a longer waiting list.
00;09;36;06 - 00;09;57;03
Unknown
You might have to pay more, but just finding somebody to do those repairs is really hard. So, you know, that's all to say. If you own a home, then when you map out your cash flow for the next couple of years, you should just anticipate that those costs are going to go up. And that should factor into how much you spend on vacations and new cars and those kinds of things.
00;09;57;05 - 00;10;19;26
Unknown
And if you don't yet have a home and you really want to get one, just cool your jets for a while, put it off for a little bit. There's there's there are good reasons sometimes to rent and waiting until things calm down a little bit, can be a really good financial decision. Yeah. We we just bought, some new appliances a few years ago, and already the the oven has some problems.
00;10;19;27 - 00;10;34;01
Unknown
Yeah. Or, you know, the the the range. This one of the, the back burner doesn't work. Yeah. And the thing things only like three years old. Exactly like my mom used to, you know, she had an oven and a range that that was like 30 years. It was working. Well, that was it. You know, we don't make them like they use.
00;10;34;01 - 00;10;48;16
Unknown
No, we bought a dishwasher, a few years ago. And the guy, that's what the guy said to us is like, yeah, well, they used to build these things that would last a long time. He said, nope. Not anymore. Five years, five years, they're gone. Those. But those avocado refrigerators from the 70s, they're going to outlive all of us.
00;10;48;19 - 00;11;03;22
Unknown
It's going to be the avocado refrigerators and the cockroaches after the nuclear holocaust. That's they're going to outlive all of us. But nothing you buy now, even if it's avocado. You heard it here first.
00;11;03;24 - 00;11;38;15
Unknown
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00;12;29;29 - 00;13;08;27
Unknown
All right. So what's your 30 minute action item 30 minute action item is how big is your emergency fund. All right. Thank you so much Steve is a great episode. Three zero minutes money is where you can find the podcast of course on all the podcast platforms like rate, review, share and do all that good stuff. We'll catch you next time at 30 Minute Money.