First American: Rising costs squeeze homeownership for millions

The cost of owning a home in the U.S. has jumped sharply in recent years, reaching an average of more than $1,700 per month in 2023 — a 17% increase since 2020 — according to an analysis by First American senior economist Sam Williamson.

Using the most recent U.S. Census Bureau data, Williamson found that all homeowners — whether they have a mortgage or not — are seeing more of their income eaten up by the rising costs of taxes, utilities, insurance and monthly mortgage payments.

While those with mortgages have faced the biggest increases in absolute dollar amounts, those who own their homes outright have experienced sharper increases relative to their incomes.

Between 2020 and 2023, average monthly expenses for mortgage holders rose by $305, reaching a record $2,268 — a 16% increase. For homeowners without a mortgage, monthly costs rose by $180 to an average of $799 — up 29%.

This growing burden has widened a generational divide. Mortgage borrowers, who are often younger and earn less, have seen their housing cost burden edge up slightly, from 19.8% of household income in 2020 to 20.3% in 2023.

“Free and clear” homeowners without a mortgage, who are often older and have a fixed income, saw their housing burden rise more dramatically — from 9.4% to 10.5% during the same three-year period.

Williamson pointed out that the trends are troubling, but not historically unprecedented.

“Mortgage holders faced a similar burden rate as recently as 2018, and outright owners saw comparable levels back in 2015,” he said.

The main driver of increased costs for mortgage holders is unsurprising — rising mortgage payments.

Home prices surged between 2019 and 2021, followed by a spike in mortgage rates starting in 2022. The result was an average monthly increase of $275 in mortgage payments since 2019, which could amount to nearly $100,000 more over the life of typical 30-year loan.

Outright homeowners haven’t been immune. Rising home values have significantly pushed up property tax bills.

“Property taxes surged as pandemic-driven home value gains pushed up assessments — rising by $32 (per month) in 2022 and another $11 in 2023,” Williamson said. “That adds up to more than $500 in additional annual taxes, more than double the roughly $200 increase faced by mortgage holders over the same period.

‘”Both groups, however, saw similar increases in home insurance premiums, which have risen sharply since 2021, particularly in disaster-prone regions like the South — a trend that is likely to continue as extreme weather and climate disaster events increase in frequency and severity.”

Williamson indicated that a future First American analysis will explore the rise in “cost-burdened” households — those spending more than 30% of their income on housing — as affordability challenges deepen.