Owning a Home Might Not Be a Good Investment

New data collected by Zillow indicates that simply owning a home can be a very costly proposition. The website’s analysts found that the average American homeowner pays $9,477 annually in hidden unavoidable and maintenance costs.

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That means a home is a far more costly investment than most people realize. It will cost a family or individual that has completely paid off the mortgage $9,477 a year to simply own a house.

Some of the highlights of the Zillow survey include:

  • The average American pays $6,042 in “hidden unavoidable costs” for the privilege of home ownership. The expenses in this category are mostly insurance and property taxes.


  • It costs around $3,435 a year to maintain the average home in the United States. Zillow figured such costs as yard care, carpet cleaning, gutter cleaning and pressure washing into this category.


  • The most expensive place to own a home in the United States was the Boston area, where it costs $13,930 a year.


  • The cheapest metro area to own a home in is Phoenix, where it costs around $7,550 a year.


  • The most expensive place to maintain a home was the San Francisco Bay Area, where it cost $4,653 a year.

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  • The cheapest city to maintain a home in was Denver, where it cost $2,782 a year.


Interestingly enough, Zillow might be underestimating the costs of home ownership because its survey does not include utilities. Zillow reported that high property taxes, which are driven by home values in most markets, are the major cause of “high unavoidable costs.”

The service did not figure in the cost or savings from doing it yourself. Nor did it figure in the cost of additional services such as garbage collection, which can be paid for by taxes in some areas.

Is a Home Really an Investment?

What these figures show is that a home can be a poor investment because of the costs associated with it. Instead of increasing your net worth, a home can quickly eat up your cash, particularly in areas with high property taxes.

Zillow is to be commended for doing this research. Those that are thinking of buying a home should definitely do some research on costs before purchasing. Zillow’s figures indicate that high property taxes can quickly destroy any added net worth from home value. It might also pay to do as many of your chores yourself as you can, particularly if you live in the San Francisco area.

Home Ownership Rate Hits a 20-Year Low

These figures also show us why so many Americans are choosing to forgo homeownership these days. The U.S. Census Bureau reported that the nation’s rate of home ownership fell to a 20-year low in 2014, according to The Wall Street Journal. Census Bureau figures that 63.9% of Americans owned their own homes in 2014 were down from 69.2% in 2002, the year with the highest level of home ownership. Today’s rate is about the same as it was during the economic downturn in the early 1980s.

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Owning a home has become a very expensive proposition with fewer rewards and greater risks and costs for average people. It is easy to see why more Americans are choosing to keep renting—if they can find a place to rent. The vacancy rate for rental housing in the United States in the fourth quarter of 2014 was 7%, the Census Bureau reported, which means that 93% of the nation’s rentals were occupied.

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One has to wonder if home ownership has now become so expensive that it has become a drag on the economy. Unfortunately, Zillow’s number crunching indicates that could be the case.

Perhaps it is a very good time to become a landlord; the demand for rental housing is increasing as the rate of home ownership is falling. Expect to see the number of home owners continue to fall as long as these costs remain so high.