Why Buying a Home is HARDER THAN EVER!

I talk a lot here on the channel about the hidden expenses of being a homeowner and what it really takes because so many people believe that you can just save for the down payment and get into it or maybe not even save for a down payment at all and become a homeowner with 0% down and everything's going to be honky dory from that moment forward, which is definitely not the case. And today I'm going to show you guys some real world examples of just how much some of these additional costs of being a homeowner can be. And these are just averages, so it can be a lot more or a lot less for some people, but the reality is a lot of people just aren't ready for this. They think they are, but if you really sat down and evaluate your finances and look at how much money you have to spend on being a homeowner, a lot of people will quickly realize that they are grossly underfunded, just like a lot of the condos here in Florida. The reality is all of the expenses surrounding being a homeowner have been creeping up and getting more expensive. So just property taxes, utilities and maintenance and insurance, okay, just those four are adding up to an average of almost $1,200 a month right now. And that's according to Zillow as of June of 2023. So those numbers are already a year and a half old. So let's just round it up to maybe $1,300 now, maybe even $1,400 because of inflation and because of how much everything has been going up. So right now, the average monthly mortgage payment is about $1,770 a month if you put 20% down, which most people do not, okay? But let's assume you did for a moment, even if you were to do that and you add up that $1,770 a month plus the extra $1,400 a month you're going to be paying in taxes and insurance and maintenance and utilities, well now you're up to $3,170 a month, guys. That's over $38,000 a year going towards just paying for the house before you spent money on anything else. And like I said in the beginning, these are averages. So a lot of people are going to be paying more and a lot of people are going to end up paying less. So if you think you're doing well because you have your down payment saved and you're ready to become a homeowner, think again. Think if you have an extra $1,200 to $1,400 a month to put towards these additional expenses, guys. It's like basically paying for two places to live. If you're paying $1,800 a month in rent somewhere right now, you're going to be paying an additional $1,300, $1,400 a month in rent for somewhere else, but it's actually the same house. So that's why it's becoming more and more favorable to be a renter as of late. Let's give you guys some figures in the breakdown of how much some of these costs can be. Let's start with homeowners insurance. A lot of buyers, they don't look at how much homeowners insurance is going to cost them until they have committed to buying the home, which is a huge mistake. You need to get real insurance quotes from real insurance companies on real properties. Guys, you can't just take the estimate you see on Zillow or Redfin and assume that's how much your insurance is going to cost. That can be off by a ton. Right now throughout the United States, the average homeowner is paying about $1,820 a year in homeowners insurance, which isn't too bad. In fact, everybody, if you're living in Florida, would be super envious of that amount in most cases because here in Florida, it's about triple that. So you have to be ready to pay that because it's a necessary expense. You have to have homeowners insurance if you have a mortgage, and you can also almost guarantee that that's an expense that will continue to go up. For the entire time that you have insurance, that's really never going to get cheaper, guys. Once in a while, you might get lucky and switch companies and get a deal and you're able to lower your rate. But I wouldn't count on it happening very often. Then you have home maintenance, okay? Routine home maintenance comes in at an average about $500 a month according to Zillow and the website Thumbtack. That includes things like appliance repairs, carpet cleaning, lawn care, pest control, pretty much everything that's not your electric bill, everything that's not an insurance expense. Just things you need to do in order to keep your house looking okay and staying livable and in nice condition. And then, of course, you have the bigger repairs like a new roof or a water heater that can cost a lot more, and those are usually unexpected expenses, things that you don't realize are going to happen. You know, a new roof on average costs people about $20,000 per year. A new water heater can cost you upwards of $4,000 installed by a professional, completely unexpected expense. Now, of course, when you're going to buy the home, you might get a good idea of what might need to be replaced soon from your inspection report, but even that doesn't catch everything. Sometimes you just don't know, especially with something like a water heater, right? Like yeah, if it's old, then there's probably a high probability it might need to be replaced, but it could also last 10 more years. You just don't know. Now, the rule of thumb that a lot of people like to use is that you want to set aside 1% of your home's value annually to cover these expenses. So if you buy a $300,000 house, then you want to set aside $3,000 a year for these expenses. And of course, you have to remember that that number is going to increase as the value of your home does simply because of inflation. So if you buy the house for $300,000, let's say you bought a house $300,000, you know, five or 10 years ago, and now the house is worth half a million, well, now you should be setting aside $5,000 a year for those same exact expenses due to the increased cost of living, due to inflation. The average person pays about $300 a month in HOA fees in the United States, but it can be much lower than that, depending on the neighborhood you buy in, or if you're buying one of these expensive condos like here in Florida, you could be paying thousands of dollars a month in an HOA fee. Now this isn't something that should be a surprise if you're looking at buying a home that does have an HOA fee. But what could be a surprise is how much that HOA fee can jump unexpectedly. And there's really no caps on how much it can jump because there are a lot of unforeseen things that can come up. HOA fees a lot of times include different utilities and different insurance expenses and things that can't always be predicted. And then of course, there's the even more dreaded special assessment that people get hit with. Every condo owner knows what that's about right now, if you're in Florida especially, because we're all getting hit with one. This is causing such a financial problem for so many people, like here in Miami-Dade County, for example, they implemented a new program recently where people can get a $50,000 loan if your income is below the median average here in Miami-Dade County in order to pay for this. It's a 40-year loan, zero interest, and you basically make payments based on your income. And if it's not paid off after 40 years, you owe the entire balance that's left over at the end of the 40 years. So imagine that. Imagine having to get this $50,000 loan just to be able to pay for one special assessment and you don't even know if there's going to be another one coming down the line at some point. And a lot of people will say, well, just don't buy a house or don't buy a condo or a townhouse that's in an HOA. And of course, you will have that expense eliminated, but it doesn't eliminate all the other expenses like we just talked about. If you're not in an HOA, you are going to be responsible for paying for that $20,000 roof, for example, versus if you live in a condo, you won't be. So it kind of depends on what kind of risk tolerance you have and what kind of expenses you're willing to take on yourself. And then of course we have property taxes, something no one can escape, even if you have a paid off home. Now there is no one specific amount that people pay in property taxes because property taxes are assessed on a county and state level. But you can reasonably say, depending on where you live, you're going to be paying anywhere between 1% to 3% annually of your home's assessed value, depending on where you live. And I've talked about this and showed you guys some recent examples of people that are seeing their property tax bills go up literally 50, 60% year over year due to reassessments that are happening. Now, a lot of those people didn't see a reassessment in over 10 years, like in states like Pennsylvania, for example. And now they're kind of getting hit with that large increase all at once. But if you live in a state like Florida here, you can see an increase in your property taxes every single year indefinitely for the entire time you own the home. You know, it's very rare to see instances where the property taxes go down. Some people say that it never goes down, but that's not actually true. It can go down. And I've seen many examples of where it does when the market is down and if you protest it. But if you look at the life of the time you own the property, you're going to see many more instances where the property taxes continue to rise versus go down. And one rookie mistake that a lot of home buyers make, especially if you're a first timer, is they look at what the current owner is paying in property taxes and they automatically assume that when they own the house that they're going to be paying the same, which couldn't be further from the truth, guys. Because pretty much every municipality across the country will reassess the value of your home at the time of transfer or purchase. So you can guarantee almost that you are not going to be paying the same amount in property taxes as the old owner was. And then of course you have utilities. The average homeowner spends about $3,000 per year on energy, including electricity and natural gas, according to Intercontinental Exchange. The average water bill is about $1,000 a year. These are unpredictable expenses as well, because the rates for these utilities always go up. Also, the amount of usage that you have can be charged in different tiers and different levels depending on how much you use. Like all the electric companies, the more electricity you use, the higher rate they bill you at. And sometimes it will be the same thing for the water bill or the gas bill. I remember when I owned this duplex in West Palm Beach, guys, and this is before the pandemic, before we've seen the mass amount of inflation that we have seen, the water bill alone at this duplex was anywhere between $270 to $330 a month, just for the water bill. Now, the water bill did include the trash pickup and the recycling, but still, it was just insane, guys. Most of it was based on water usage, and half of the bill was like sewer fees. It wasn't even the actual water being used. It was like the city charging you or the county of Palm Beach charging you to basically flush the toilet or to have water go down the drain. That's what you were paying for. And then there's other things that you just might not realize until after you move into the house. Like, say you're moving further away from your job. Well, now you're going to be spending more money on commuting, more money on the gas for your car, right? Or you might be moving to a different neighborhood where your auto insurance might go up because that's how it was for me when I moved here to Florida. My auto insurance almost doubled coming from Illinois to Florida. So moving can have a dramatic impact on those expenses for you. And that's why it's so important that you don't just use all of your down payment money to buy a house and now you're completely broke and you're going to move in and think it's going to be bliss moving forward. You are going to need so much extra money. I mean, imagine a situation where you basically need to save the down payment twice. I think that's probably a good rule of thumb in 2025 for people. And I know that might sound crazy, right? Like, okay, you need $40,000 to buy this house? Have 80 saved because you're going to need that extra money when you move in for things that you just don't expect. Trust me, I have been through this with investment property and my own personal residence. Pretty much any type of property you buy, whether it's a duplex, whether it's a house, a condo, whatever, you are going to have things come up that you don't expect. And there could be a new one on the horizon that people really don't expect, especially here in Florida, guys. But if this becomes a standard here, then this might start becoming a standard everywhere. One thing that you know, if you live in Florida right now, that more insurance companies are forcing you to replace your roof if you want to get insurance with them, right? That's been happening to people. If your roof is 10 to 15 years old, they're forcing you to get a new roof. But what you might not expect is that moving forward, not only will they require you to replace your roof to get insured, but also they'll require you to put a certain type of roof on your house. So right now, 65% of the homes in Florida have the traditional asphalt roof. And that's for obvious reasons, because it's the most affordable and economic solution, especially for builders. They're going to usually build new houses with asphalt roofs, okay? And lots of insurance companies now are looking at requiring homeowners to have a stronger type of roof, like a tile or a metal roof. But what's the problem with that? You might ask. Oh, well, the problem is these roofs are a lot more expensive. Now, they are a lot more durable as well, which is why insurance companies want you to have them, and they will last typically twice as long as your traditional asphalt roof. However, an asphalt roof will cost you about $3 to $5 per square foot of the home, while a metal or tile roof will cost you $8 to $14 per square foot of that house. So it can cost you between double and triple just to put a tile or metal roof on your home. Now, I think it's probably the smarter thing to do, especially if you can afford it, because it is going to protect your home from more storm damage. It won't be blown away as easily either, like a traditional asphalt roof can. And there could be additional benefits besides the safety. You could also see your insurance premiums go down because of this, and also you may be eligible for some tax credits since you're fortifying your home against a storm. However, this is a huge unexpected expense for homeowners, which is kind of the underlying theme of this video. Imagine if your insurance company tells you, not only do you have to replace the roof of your house, but it has to be a metal roof, and it's going to cost you $50,000, okay? That's a special assessment, guys. Maybe you don't have an HOA, maybe you're not living in a condo, but if you have a $50,000 surprise expense you weren't expecting, and you don't have the money, whether you do have the money or not, it's a special assessment. It's an unexpected expense that just came out of nowhere. If you live in California, for example, you're going to be paying more for homeowners insurance over there as well. They just released new rules from the California Department of Insurance that allows providers to pass the cost of reinsurance onto its policy holders. California is becoming very close cousins with Florida now, because that's what we do here. What reinsurance is, is this the insurance that's taken out by insurance companies to cover them, because a lot of insurance companies don't actually have the full amount of funds available to pay out on all of their customers, right? That's why they have reinsurance. They can pull from that reinsurance money in case they need it. Just like traditional insurance, the cost of reinsurance has also skyrocketed in the recent years due to the amount of natural disasters and the cost of replacement for everything. This marks a big change in California, because this is the first time that insurance companies are now going to be allowed to pass on this cost to the customers in California. So if you're already struggling to pay for your insurance premiums over there, get ready for them to go even higher. So California and Florida actually have a lot in common, especially when it comes to the home expenses that are likely to make real estate become cheaper in the next few years, because a lot of people cannot or will not pay these expenses and are being forced to sell these properties. The Director of Insurance for the Consumer Federation of America says that customers in California might see their insurance premiums now go up anywhere between 30 to 40 percent, guys. 30 to 40 percent. Surprise! It's fun to be a homeowner. Now this does come with a small caveat for the insurance companies, which is that they can pass on their reinsurance costs, but they also have to commit to writing more policies in wildfire-prone parts of the state. Insurance companies will have to start increasing their coverage by 5 percent every two years until they hit the equivalent of 85 percent of their market share. That means that if an insurance company writes 20 out of every 100 state policies, they would need to write 17 in a high-risk area. But some of the people who are against this new change in California are saying, listen, this is going to lead to much higher insurance premiums, obviously, for everyone, but there's loopholes in this, as there is everything that do not guarantee insurance companies would write up more policies in the wildfire-prone areas. And they're saying basically this was all done in cahoots with the insurance industry and the politicians, they're all in bed together, and that's how they come up with these horrible insurance regulations that just end up screwing over regular people in the end. Another thing that Florida and California now have in common. Now we all know that home sales have been in the gutter for quite some time, and we are at 30-year lows in terms of how many homes are selling on the U.S. housing market, but this is having a much broader impact on the economy than a lot of people realize. As of 2024, we now saw more retail stores closing in the U.S. than stores that were opening. Big lots and cons were some of the biggest bankruptcy filings, where they're literally closing down thousands of locations, and also Party City, they announced that recently. I've talked about all of them in prior videos. But the problem is, because home sales are so slow, it's starting to bleed over into these other retail businesses as well. You saw another company called LL Flooring, which filed for bankruptcy because people aren't buying houses, so guess what? They're not needing as much new flooring. Flooring is a very popular thing to do if you're preparing a house to sell, or you just bought a new house that needs a new floor. But if people aren't selling houses and no one's buying them, it's going to be hard to keep businesses like that going. And also, let's face it, who needs a furniture store when you can just pick up a free couch like this on the side of the road? There's another great illustration of how slow the housing market is. This house was purchased back in 2017 for $1.15 million. Then back in July of 2024, they listed it for almost $3.6 million. Never really changed the price. They just took it off the market for a little while, tried that age-old real estate trick where you take it off the market and throw it back on and try to trick everybody into thinking it's a new listing. Yeah, that horrible magic trick that never works. Well, now they just had to cut the price another $145,000 as of November. Now they're down to $3.45 million. Still no takers. So if you take a look at the Zestimate history here, you can see where they listed it at the top of the graph and how much the price has been falling since they listed the property. And that's a great illustration as well, showing just how much sellers are behind the curve when it comes to adopting the right price to get properties sold. And for anybody who doesn't know this about real estate, it is not normal for it to take six, seven, eight months a year to sell a house, okay? That is far beyond normal. If a house is priced properly, it shouldn't take more than 60 days maximum, guys. Probably even less than that in most cases, but taking into consideration how much time it might take to close on certain properties or the buyer, the seller needs extra time, whatever. But 60 days max. If your house isn't sold in two months, it costs way too much. But I would already be worried if 30 days goes by and you haven't even received an offer, that's a clear indicator that you are way overpriced. But a lot of people have shifted any of the spending that they're doing in today's economy more towards service-based businesses because let's face it, when you can just pick up a free couch like that back there, how often do you really need to go out and get a couch? So a lot of furniture stores have been suffering through this. You also have high interest rates and inflation dragging down sales for all retailers due to the inability for people to borrow and continue spending. I mean, it's just not possible in most cases anymore. Home Depot and Lowe's have been struggling over the past couple of years. I made some videos about that in the past. A lot of people are choosing to delay their home improvement projects, especially with the higher interest rates, because let's face it, most people don't have the money to spend on this stuff. They finance a lot of these projects. And when interest rates are higher, it's not a very favorable time to do those renovations, especially when your budget's already being pinched from multiple other directions due to higher inflation. But this is how bad the situation is, guys. In 2024, we saw 1,400 more stores close than we saw open. You've seen a lot of pharmacies also close their doors, like Walgreens and Rite Aid and CVS. You've seen hundreds of those places get shut down. And just take a look at this graph here. You can see just how bad the net U.S. retail store openings have been, really going back even before the pandemic. It's been very bad for quite some time. We're seeing brick and mortar stores just die. But a lot of the people who are still bullish on the economy say, well, this is nothing to worry about. This is just flushing out some of the inefficient or poorly positioned retailers. You're still seeing companies like Five Below and Dollar General open up more stores, because you know, we need more dollar stores. That's just like the lifeblood of the U.S. economy. I think we can all agree that a dollar store opening in your neighborhood is no replacement for a furniture store that's been in business for 100 years or another type of store that sells, you know, a multitude of different merchandise versus just the cheapest of the cheap crap that no one really needs. So we're likely to see this trend continue indefinitely because the home sales are not picking up. It's remaining very slow, which I'm glad to see because you're seeing a lot of people, you know, either being forced to be sidelined or choosing to be sidelined due to everything we just talked about in this video. These expenses are off the charts, guys, and a lot of people are saying no to being a homeowner right now. And I think it's the smart thing to do. Let this whole situation shake out over the next few years and let's see prices come back down to reality, okay? A lot of sellers are going to have to get with reality and sell homes for a much more realistic price. You're already seeing these trends begin in states like Florida and in Texas. Even parts of California are starting to see this now too. Places in Arizona and Idaho and Tennessee, lots of other states are starting to see prices start to decline year over year as sellers need to get with reality. Gone are the days where you have to worry so much about basically missing out on becoming a homeowner because you didn't buy a house a year ago. Nobody should be having that FOMO in 2025. And take a close look at these expenses we talked about in the first half of this video and really be honest with yourself about whether or not you can afford that additional rent payment on top of your house payment because that's essentially what you're going to have if you decide to sign up for this. So if you enjoyed this video, make sure you are subscribed to the channel and if you don't want to wait for my next video to come out, check out this one on the screen right over here and I'll see you in the next one.