Ballooning Costs Rewrite the Math of Owning a Home

Soaring costs for home insurance and property taxes are busting homeowners’ budgets.

- NICOLE FRIEDMAN

Insurers have pushed big rate increases because of losses from natural disasters and rising costs to repair homes. Surging home values in recent years, meanwhile, have lifted property taxes for many homeowners.

These ballooning expenses are rewriting the math of homeownership. In September, 32% of the average single-family mortgage payment went to property taxes and home insurance, the highest rate ever for data going back to 2014, according to Intercontinental Exchange.

The analysis is based on borrowers who use escrow accounts to pay their taxes and insurance as part of their monthly mortgage payments.

For a small but increasing share of households, the burden is far more significant. In five major metro areas—Rochester and Syracuse, N.Y.; Omaha, Neb.; New Orleans and Miami—at least a quarter of borrowers spend more than half their monthly mortgage payment on taxes and insurance, according to ICE.

These metro areas have high property taxes or pricey home insurance relative to typical home costs, or both.

Nationwide, taxes and insurance make up more than half of the monthly mortgage payment for 9% of single-family mortgages. That is up from less than 4% at the end of 2014.

A growing burden

Rising taxes and insurance premiums intensify the lack of affordability home buyers already face because of recordhigh home prices and elevated mortgage rates. Those deterrents have led many home shoppers to give up this year, putting sales of existing homes on pace for their worst year since 1995.

But while mortgage rates fluctuate, climbing property taxes and insurance costs show no sign of reversing.