Down payments and mortgages tend to dominate discussions of homebuying, but there are other costs buyers should consider, according to Realtor.com, including property tax rates, insurance and home-improvement work needed to make the space liveable.
The website analyzed the top 100 U.S. metros for how they fared based on such costs, categorized as property tax rate, insurance and utilities. New York City came out on top, in part because it has one of the highest property tax rates in the country (2.0%).
Property taxes are much lower for Cape Coral, FL (No. 4), Miami (No. 6) and New Orleans (No. 7), but those markets face higher home insurance rates compared to the others on the list due to their storm-prone locations.
These kinds of additional housing-related costs are one more element first-time buyers must consider before entering the market. Millennials are particularly in tune with and concerned about managing what they can afford, perhaps after witnessing the economic mess created by the housing bubble and overzealous borrowers. A Realtor.com study last fall found that today's first-time buyers are focused on the investment value of their home.
Zillow recently launched RealEstate.com, a home-search website aimed at millennials that allows shoppers to browse by preferred down payment and monthly mortgage costs. The website shows potential buyers an “all-in monthly cost,” which includes the principal and interest payment as well as property tax, homeowners’ insurance and utilities estimate, and closing costs.
Even with that focus, however, not all buyers are aware of or consider the other monthly expenses they’ll face. For example, 25% of homeowners’ expenses are utilities, according to Attom Data Solutions, versus 21% for renters.
And Realtor.com warns that leaving one locale for another in search of lower taxes isn’t always wise as those rates often indicate lower funding. As a result, those cities may not have the same quality of transit infrastructure, parks and public schools that buyers seek.