Hidden costs of home ownership

[Rich Engelhardt]

I know - - - it's Zillow..... however, some excellent points are made & the article shows how the costs differ in different areas of the country.

http://www.zillow.com/blog/hidden-costs-178265/?utm_source=email&utm_medium=email&utm_campaign=emm-0815_buzzhiddencostshomeownership-homeexpensebutton

It was brought up a while back in this thread :
http://www.sawmillcreek.org/showthread.php?233748-Would-You-Live-On-The-Water-And-NOT-Have-a-Boat/page2

that ownership of a house vs renting could make an interesting topic, especially if different locations across the country were included.

Sooooooo.....here's the thread to start the discussion.

[Robert Engel]

My MIL moved to an adult community from her town house about 10 years ago. She was 80 then.
For $850/mo (water & sewere incl) she had total maintenance on all appliances, including AC, lawn care, pest control, and any normal maintenance like paint peeling, etc. It was a duplex that was part of a housing area for officers on a decomissioned air base.

Even though her townhouse was paid for, we estimated over $500/mo to live there.
Throw in a new roof (which she shelled out $8500 for), new AC unit, and pro-rate that over 10 years.
There is no guarantee that home ownership will bring a profit later on. Even without the real estate bubble burst a few years ago, it is common for property values to decline when neighborhoods get old, or a bad element moves in, etc.

I think at a certain age, you need to start thinking about downsizing and going to a lease property is worth looking at for many people.
Of course, it all related to lifestyle, health, etc.

[Rich Engelhardt]

Even if they (property values) do increase, the increase may be pretty high as a percentage, but, low overall.

I'm looking at a house now that sold for $43,000.00 back in 1988 and it's on the market now for $99,300.00.
That's close to double the amount - but - still pretty much peanuts for all the years of payments plus expenses.

[Jerry Thompson]

Rich, the $43k is about equal to the $99k in today's dollars.

[Aliza Martin Joe]

I know - - - it's Zillow..... however, some excellent points are made & the article shows how the costs differ in different areas of the country.

http://www.zillow.com/blog/hidden-costs-178265/?utm_source=email&utm_medium=email&utm_campaign=emm-0815_buzzhiddencostshomeownership-homeexpensebutton (http://www.loveandbuyit.com)

It was brought up a while back in this thread :
http://www.sawmillcreek.org/showthread.php?233748-Would-You-Live-On-The-Water-And-NOT-Have-a-Boat/page2

that ownership of a house vs renting could make an interesting topic, especially if different locations across the country were included.

Sooooooo.....here's the thread to start the discussion.

I have visited Zillow blog. It is really very interesting post here. Thanks

[Rich Engelhardt]

Jerry - true enough - which is even worse!
That means that the selling price has managed to pretty much stay the same since 1988 - meanwhile, the monthly payments have been piling up along with taxes, insurance and upkeep.

[Brian Elfert]

It is unclear what Zillow is including in their expenses. I figure over 10 years I could spend as much as $20,000 on appliances, furnace, A/C, septic/well, and roof. $1,500 a year for utilities and $1,800 a year for taxes plus $1,800 for insurance. It is unlikely I would need to replace all four of my major systems over 10 years, but at least I would have money in savings after 10 years to pay for most of it. The septic alone could cost $15,000 to $20,000 to replace, but should be longer than 10 years before replacement. I put aside $150 a month for major house repairs.

My taxes are really low for Minneapolis. My previous house is $5,200 in taxes this year.

[Malcolm Schweizer]

Jerry - true enough - which is even worse!
That means that the selling price has managed to pretty much stay the same since 1988 - meanwhile, the monthly payments have been piling up along with taxes, insurance and upkeep.

But even if your rent is half the mortgage, you are out 100% of your rent. Your mortgage you can at least get something back out of, and your mortgage is relatively a FIXED cost year/year. Rent goes up regularly. Up front you may be paying more for mortgage, but in a few years as rent continues to go up, you are still sitting on the same payment. Maintenance is an issue, yes, but I am so glad I bought a home, and my only regret is that I waited so long.

[Rick Potter]

A couple examples from my loooong life.

1: Location, location: We bought a brand new tract house in an upper middle class town in 1973. We paid $40,950 for it, and had to put in lawn, fencing etc. Later we did a remodel, added my shop, and a couple hundred square feet on the house. Total cost about $30K in the 90's. We sold the house to our daughter for $600K in 2005 (about $100K under appraisal).

The recession hit, prices dropped about 1/3, but they are now back above what she paid for it.

2: In 1976, my dad bought an 1100' house built in 1952. This house is in a lower middle class town with a history of problems, and bad schools. Interestingly, the town above is adjacent. At the time he bought it there were 900 homes vacant and boarded up in the city. He bought it from a family that just wanted out. There are two stories about the price he paid, either $10K or 7K. He rented it until his death in '05, when it went to me.

Presently it is rented at $1400 per month, which is about 10% below market. I put money in rehab as needed to keep it up, (recently 23K), but at $16K a year, it still pays for itself every two years (including normal and capital expenditures).....in a not so nice location.

3: About Zillow (and the like) estimates. Last year I checked the estimated selling price on my home. I found three. The first was about $200K lower than our recent appraisal, and showed pictures from over 10 years ago; the second was fairly close, within 10%, and showed fairly recent specs on bedrooms, baths, etc. The third one was more than $200K higher than our appraisal, and used totally unrelated comps. I would definitely take these estimates with a shaker of salt, if they can have a range of over $400K error.

[Dan Hulbert]

I've lost faith in Zillow. I've bought my current house nearly 6 years ago and they still have it listed as "Real Estate Owned Property".

[roger wiegand]

I always wonder who it is that these "hidden costs" are hidden from? Or how? Stuff like utilities,maintenance, and property taxes come in quite obvious bills. They may be "hidden" from renters (who pay them whether they think they do or not) but certainly not to home owners. If there are hidden costs to home ownership they are so well hidden I haven't noticed them in 40 years-- and perhaps I'd rather not find out about them now, I'm happily oblivious.

I refuse to think of my home as an "investment", any more than I think of my woodworking machines and tools as an investment. I invest in the stock market, I live in my home. I'm paying for someplace to live, where I can pretty much do as I please without having to ask anyone's permission, where the cost structure is relatively predictable (if ever-increasing), where the landlord can't decide to throw me out and turn it into six condos, etc, etc. I make improvements based on what appeals to me and makes me more comfortable. I could care less whether it is dated or trendy -- I assume it will cycle through both repeatedly over a period of time. I have absolutely no intention of selling it, even if I could realize a nice gain on it, though I've done OK from a return point of view on the last two houses, so what it is "worth" is irrelevant and meaningless except as it determines the property taxes.

[Alan Hick]

Building off the previous post. And, additionally asking the question: "what about the hidden, or not-so-hidden, joys of home ownership?".

I bought an 80 year old bungalow many years ago. Since buying it I've gutted the house, room by room, and gutted the yard. I've completely made over the entire property, by myself. The costs were significant, but I saved a lot by doing everything myself.

Now, I have the yard I want, the house I want, and the garage/shop I want. On an almost daily basis I get compliments from people walking by on the sidewalk or driving by in the street. And, after having completely overhauled my property, all my neighbors have done significant renovations.

I value the memories I have from all the work I did, and I shudder to think of being stuck in an apartment or condo and having no freedom to change my surroundings to match my desires.

There are costs. But, to me, the benefits/joys of home ownership outweigh the associated costs by so much that it isn't even worth considering. The only caveat I can think of is this: if you're going to move in 3-5 years, then by all means rent. If you're going to stay put, BUY. The blessings are innumerable.

[Robert Engel]

It's not just "location, location".
Plenty of homes in good location but no control over what happens to a neighborhood over a 20 yr period of time.
I've seen it a hundred times people buy nice home in nice area and home worth less now than they paid 20 yrs ago.
I've even seen "upper" middle class neighborhoods become slums in my city.
We know some of the factors causing a neighborhood to turn into a slum but there is no way to control it other than buy a $1M home in an exclusive area.

[Brian Elfert]

I suspect some of the costs new homeowners don't think about are replacing appliances, replacing major systems, and replacing the roof. If a major system breaks in the first year a new homeowner may not have the money to replace it. My house has new everything except roof so I hope to make it ten years before having to replace furnace, A/C, or roof. I put aside money every month for this so I hope to have plenty in savings by the time I need repairs or replacement.

[Dennis Aspö]

Fixed house costs for us, we built our own house and moved in 2014, focus on everything being energy efficient:

-Electricity roughly €100 a month (this includes heating)
-Water & sewer €20 / month
-Trash collection €30 / month

Of course then there's also a mortage to factor in.

We chose to live pretty rurally but it seems to be a developing area we're in, still we built a house with the intention of settling down and not selling it and moving away later. I was never one for all that "mobile workforce" stuff. Moving away with the kids and taking them from their grandparents and community with roots in it, for the chance to make more money. Taking a pay cut to live here is something I've done gladly.

I could make 2 or 3x if I had moved to Helsinki (finlands capital), but I would've jumped off a building before long having to live there so I am probably better off now.

[Curt Harms]

It's not just "location, location".
Plenty of homes in good location but no control over what happens to a neighborhood over a 20 yr period of time.
I've seen it a hundred times people buy nice home in nice area and home worth less now than they paid 20 yrs ago.
I've even seen "upper" middle class neighborhoods become slums in my city.
We know some of the factors causing a neighborhood to turn into a slum but there is no way to control it other than buy a $1M home in an exclusive area.


Maybe live where politicians and government policy makers live? Those areas won't be permitted to decline.

[Julie Moriarty]

I just sold my house. I designed and built it in 1986-7. From '87 to the present, the interest paid was substantial. Some of that was recouped in taxes, as was some of the real estate taxes I paid. I have no idea how much I poured in to the house to maintain and update it and I don't think I'd want to know because it would be depressing, from an investment POV.

After I received the check from the sale, it hit me just how much money I had paid the realtors and all the other people who make a living from home sales. That too has to be figured into the cost of home ownership.

When I look back at all the money I spent owning a house, over the last 28 years, owning a boat (and living on it) seems a bargain.

[Brian Elfert]

I found out you have to research every little thing when you buy a house. The road in front of my house looks like it was paved with asphalt, but it is falling apart and I assumed it was because the development is 35 years old. I talked to the city the other day about fixing the potholes and asked when they might be repaving the road. They told me the city will never be doing any road repairs because the road was never paved to start with. The road was gravel up until six or eight years ago and the city dumped asphalt millings from a major highway project on the road. If the city has the road paved they will assess the homeowners 100% of the cost and that it would cost each homeowner between $30,000 and $50,000.

I probably wouldn't have bought my house if I knew the road would never be repaired without shelling out $50,000. The thing that really pisses me off is the city doesn't assess residents for repaving roads or even reconstructing roads if they were paved in the first place. I'm paying $250 a year in taxes towards road repair yet I will never see any benefit from that money. Yes, I have expressed my displeasure to the city council.

I never would have thought about checking into the roads program before buying. The road looked like a normal asphalt road and I figured the city might assess maybe $5,000 when they repaved it. $50,000 is an amount that would put me into serious financial hurt. I wouldn't be able to sell the house with a $50,000 assessment pending.

[Larry Frank]

One would expect a real estate agent to help one with these things... but that rarely happens.

[Brian Elfert]

One would expect a real estate agent to help one with these things... but that rarely happens.

I don't know if you were referring to me and my road issue with your response or not. I don't know that I would expect a real estate agent to know about the road issue. At most the agent might have checked on how the city assesses for road repairs. The answer would have been that the city doesn't assess for road repairs.

My agent didn't do much for me, but she also knew that I had done tons of research on my own. I had to do the research because I was buying a foreclosed house that needed a ton of work. Never in a million years would I have imagined the city would not repair the asphalt city street in front the house. I think it would be natural to assume that a city street would be repaired by the city.

It sounds like the residents along the street would have to ask for the city to pave the street so it is unlikely I would ever be assessed the $30,000 to $50,000 as the neighbors wouldn't want to pay. I don't know if eventually the city would put down another layer of asphalt millings or what.