How Much Does It Really Cost to Own a Home in 2019?
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For the past 3 years, I have made it a tradition to publish a post detailing our annual housing expenses.
I have found that these summary posts have several benefits. For example, I like to know how much our family is actually spending each year to live in our home.
I have a general idea of our housing expenses … but there are a lot of benefits (to me) in drilling down on the exact numbers.
Reporting out our housing numbers can help others too … especially anyone who has never owned a home.
Existing homeowners already know this … but there are a bunch of other expenses that go into owning a home other than just paying a mortgage.
Take our home for example … in a typical year … our mortgage is between 50% to 60% of our overall housing costs. So what makes up the rest? A lot of things which I have detailed below.
Finally, I feel that my wife and I made a mistake when we purchased our home 11+ years ago.
We bought a 3,360 square foot home with a 30 year fixed rate mortgage. At the time, we thought the newly built home was a great steal and in some ways it was.
At the time of our purchase, it was the start of the housing crisis. And homes were beginning to drop in price … so we paid less than what the new home was originally selling at.
The only problem was (as we have later realized) that our home is too big … even with 3 kids.
We easily could have bought a 2,500 square foot home and lived comfortably.
So by publishing our housing expenses every year … maybe we can help another young couple consider the options of buying a smaller home? I’m not saying you shouldn’t buy a bigger home … just something you may want to consider.
Well let’s dive into more numbers about the cost of owning a home in 2019.
The Cost of Home Ownership
Between my wife and I … we can afford to pay our mortgage every month.
We can also (and do) pay our property taxes, insurance, maintenance, utilities, and every other expense that goes into owning a home.
And in 2019 … we even had enough money set aside in a separate savings account to pay over $7,000 to replace our roof.
Overall I’d say our housing expenses are manageable … but not ideal … especially since we have a goal of reaching financial independence in the next decade.
I mentioned it at the start of this post, but I will say it again … my wife and I bought a house that was too big.
If we would have been a little bit smarter 11 years ago when we purchased our current home … we could have bought a smaller house and saved a crazy amount of money.
All that savings could have really helped us push closer to hitting our financial independence number.
What’s done is done.
We have learned a tough financial lesson that hopefully we can pass along to our kids.
Eventually we plan to downsize into a smaller home that should save us some cash.
In the meantime, we like to track our overall housing expenses annually to see how we are doing. And that is what we are going to share today – our 2019 housing expenses.
How Much Does Our Home Cost per Year?
Overall, our housing costs increased a bunch in 2019, compared to what we spent in 2018 on our home.
We spent $7,636.53 more this past year than in 2018 … or a 34.5% increase.
What was the reason for the huge increase?
After 11 years of living in our home, our roof finally needed to be replaced. So we spent $7,200 on a new roof, which accounts more most of the increase.
Factoring out our new roof, we spent about $430 more in 2019 on our home … which was mostly due to an increase in property taxes.
For more details, here is a list of housing related expenses we paid between 2017 & 2019 –[table id=9 /]
2019 Total Housing Expenses = $29,785.15
Breakdown of Housing Costs
As you can tell by the numbers … owning a home is not cheap … especially a house that is too big for our needs.
And from our personal experience, the costs of our home continue to rise year after year.
Just last year we needed to replace our roof.
The good news is that our new roof should last us another 12 to 15 years. To be honest, I think it will likely last at least 20. Our original roof was built with cheap materials and poor labor. The new roof is much better quality.
We plan to sell our home within the next 2.5 years, so this hopefully will be a good selling point for potential buyers.
Enough about new roofs … let’s take a look at our spending breakdown for housing in 2019.
Breaking down our housing expenses in more detail … our mortgage still made up the biggest chunk of costs which isn’t surprising.
In 2019, we paid an extra $239.69 on our principal in addition to our normal payments. For the past couple of years I have been rounding our mortgage payments up to the nearest $100, which is where these extra payments come from.
The next biggest expenses was home maintenance, which includes our new roof. Other costs are general maintenance expenses to help keep up the home.
After mortgage and maintenance, our next biggest expense were property taxes.
We had a 9.2% increase in our property taxes, which is basically getting out of our control. I am not excited about where our property taxes are heading and will be something we continue to watch out for over the next couple of years.
Next on the list of housing expenses were utilities … which include water/sewer, heat, and electricity.
Over the past two years, our utility expenses have increased by over $700 annually.
I suspect there are several reasons for this, including one of the warmest summers I can remember. Keeping our home tolerable last summer cost us some extra cash for sure.
I also feel that as our house begins to age (we already needed a new roof) that we are not as efficient with our utilities. For example, our windows probably should be replaced. We also have plans to start replacing our toilets. All of these things add up over the years.
Our last two housing expenses were a $1,000+ for homeowners insurance and another $173+ in HOA fee’s.
As far as homeowners insurance … we are currently looking for another provider in 2020. Rates keep rising year to year on our home and when we went to file a legitimate claim in 2018 for roof damage … our current provider denied it.
Unfortunately, our premium was raised by a good amount … so it is time to drop them in 2020!
Overall Housing Costs in 2019
Overall, we paid $29,785.15 to live in our home last year.
That averages out to $2,482.10 per month.
2019 Monthly Average = $2,482.10
That monthly total comes out to 49.6% of our average take home income. We try and budget for $5,000 of spending (take home pay after taxes) each month.
Anything leftover is always invested.
So as you can tell, housing makes up a huge chunk of our monthly spending.
Realizing that we won’t need to replace a roof every single year, this number isn’t as painful as what it may seem. However, we are trending in the wrong direction for our housing expenses.
If we remove the roofing expense, our average cost per month was $1,882.10 or 37.6% of our household income.
Going forward … a better way to calculate housing expenses would be to put away money each month for larger housing expenses like replacing a roof or new windows.
We expect a lot more expenses over the next 2+ years as we prepare to sell our home. A lot of things we have neglected over the years are adding up (replacing toilets, windows, etc.) and need to get fixed.
Rent vs. Buy
One of the things I like to do when analyzing our housing expenses, is to run a rent vs. buy calculation.
When it comes to discussing housing expenses in the financial independence community … the rent vs. buy debate often comes up.
For our family of 5, we need some form of shelter. And for the time being, we choose to live in a house.
So we need to either rent or buy a house.
My wife and I value the stability of owning a place we can call home. So for us … we choose to buy instead of rent.
That doesn’t necessarily mean we haven’t consider renting. But for now, we want to own a home that is ours.
Interestingly enough … we have also realized that renting in our local area is actually more expensive than buying. So there is a financial savings in our location.
For example, a quick search on rental homes in our zip code tells me we can rent a similar home to ours for a price range between $1,900 to $2,200 per month.
The houses in this price range are all around the same age as our home and within a few hundred square feet. In addition, this search was for homes with 4+ bedrooms and 2+ baths.
Now … my comparison is based on us NOT paying for a new roof last year. If we factored in a roof … then it could make more sense for us to rent a home.
But using our monthly housing expense number (minus the roof), we are averaging around $1,890 in expenses. The cheapest comparable rental in our area was $1,900 … plus I’d imagine we’d need to purchase renter’s insurance.
However, if we factor in replacing a roof every 10 years … then the comparison would currently favor renting … in terms of a cost perspective.
But in the end … because we prefer to buy anyways (as opposed to rent) … it makes no sense at this time for our family to rent a home.
What’s Next for Us in 2020?
Owning a home has been the smarter choice for our family for over the past decade. Not only has owning been cheaper than renting, but we have been building some equity in our home.
However, I’d like to point out that we don’t consider owning our home as an investment.
The cost of owning a home is way too much to be considered the same as investing in the stock market or similar investments.
But that doesn’t mean our home is worthless. Despite little appreciation on our home, we still have been making principal payments for the past decade.
On the flip side … if we had been renting during this same time period (for a higher cost in our area) … then we would have no equity built up at all.
Looking out over the next 2 to 5 years, we are planning to downsize our current home … after our oldest child graduates from high school.
Our current house is about 1,000 square foot to big for our current needs of the family.
So reducing our square footage could really help save money and reduce our overall housing expenses.
We have a plan to eventually make this move when the right opportunity comes up.
In the meantime, we will be putting some money back into fixing up our current home to get it ready to sell.