The Cost of Being a Homeowner

I traveled a bit last month.  More specifically, I traveled what for me was quite a bit, spending two days in Mad-City for an economic development conference and three-plus days in Vegas for RECon.  

If you are a frequent traveler for business and pleasure, this is not so much for you but it is a lot for me.  I do not sleep very well to begin with and when it comes to sleeping in hotel rooms, especially in Vegas, I caught maybe a dozen hours of sleep total over the five nights spent in hotel rooms last month.

One of the things that I do like about staying in hotels is reading the local papers that are offered.  In a USA Today on May 13^th, there was a short blurb from Maurie Backman of the Motley Fool (one of the hundreds of websites that I subscribe to) citing a study by NerdWallet titled “Monthly tab to own U.S. home is $1,443.”

Normally, this is the kind of thing that one would glance at while flipping quickly through the lightest of the light newspapers before tossing it in the recycle bin, but for me it meant more than that.

I read through it while sipping some coffee in Madison at thought to myself, “Wow, I just so happen to pay about that amount every month.”

The more that I thought about it, I realized that I could probably be the poster child for that amount.

As the caffeine started waking me up including my sluggish, sleep-deprived brain cells, I did some quick math.

“Mortgage about eight hundred per month, property taxes about another four hundred and fifty bucks per month and homeowner’s insurance another hundred or so…” I calculated. 

Depending on what constitutes your definition of housing costs, I thought my own home comes in at about $1,400 per month.

Some other websites go beyond the three core costs of mortgage payments, property taxes and homeowners insurance.  For example, www.money-zine includes costs associated with maintenance, water and garbage pickup and more.  If you added those costs to my own family’s housing costs, you would have to add another $500 or more per month in our case.

According to the money-zine article, 

The following data are the median costs to own a home, using information from the American Housing Survey (2013 data, published in June 2015).  Remember that the median means half the households will spend more than the amounts below, and half of the households will spend less than these amounts.

• Real Estate Taxes:  $150 per month or $1,800 per year

• Mortgage Payments:  $800 (principal and interest) per month or $9,600 per year

• Property Insurance:  $63 per month or $756 per year

• Electricity:  $111 per month or $1,332 per year

• Natural Gas:  $50 per month or $600 per year

• Fuel Oil:  $167 per month or $2,004 per year

• Drinking Water:  $42 per month or $504 per year

• Trash / Garbage Disposal:  $23 per month or $276 per year

• Routine Maintenance:  $33 per month or $396 per year

Finally, and to put things in perspective, we'd like to point out that a typical home cost $160,000.  Adding the above numbers, we can conclude that owning a home costs the average American $1,459 per month or $17,500 each year.

For our home, we pay about $100 per month for our water bill, which also now includes $16 per month for waste removal.  I am currently paying about $120 per month for mowing. 

We reside in the Chicago area, so our electric costs are high, sometimes over $200 per month, during the summer and our natural gas costs are high during the long, frigid winter months.

Routine maintenance sounds benign, but we rarely have a few months go by without requiring replacement of an appliance or, in the case of last year, both furnaces and our central air unit.  Combined, the cost for replacing those was about the same as our mortgage payments for the year.

The biggest discrepancy between what moneyzine estimates and what our costs are in suburbia are property taxes. 

Dear reader, if your property taxes are only about $1,800 per year, bless your lucky stars and take yourself and your significant other out to your favorite place tonight.

Since my property taxes run a Benjamin per week and are even considered fairly low for our area, $1,800 would cover the first eighteen weeks of the year in our case but not the final thirty-four.  Most of our friends and relatives in the Chicago area live in nicer, bigger houses in better areas than we do and many of them pay far more in property taxes. 

My wealthy aunt and uncle pay about $18,000 in property taxes

My widowed mother in her seventies pays over $6,000 per year in property taxes.  If you were to purchase her home and not qualify for a senior citizen exemption, your tax bill for her house would run you about $8,000 per year.  My successful aunt and uncle pay about $18,000 per year and my best friend pays about a thousand per month in property taxes.  Incidentally, they all live where I grew up in Evanston.

Obviously, the $150 per month cited in by Money-Zine is not applicable to nicer houses in Evanston.  I suppose that three cheap homes in blighted rural areas or run-down inner cities must average those out.

My best friend pays about twelve grand per year in property taxes.

Backman’s writes that an estimated forty percent of homeowners don’t know how much they’re paying for insurance, since those premiums are frequently rolled into their mortgage payments.  This does not apply to me.  Perhaps because I strive to be more mensch-like with what money we do have.

I realized upon “purchasing” our house in 2001 at the age of thirty that I never wanted to deal with an escrow company again.  My wife and I had an escrow company for the three years that we “owned” a condominium in the City, and they screwed up our account twice in that short span of time.

When neighbors and colleagues marvel when I tell them this and tell me that they would not be able to pay their property taxes and insurance all at once, I shrug and say okay.  Like most people, they would prefer to pay the extra $500 to $1,000 every month than cough up half of their property taxes and half of their homeowners insurance twice per year.

What I tell them is the truth.  I would not mind opening my own escrow company and holding their money for them, investing it to make interest, and then screwing up the amounts.  But I gain some small measure of satisfaction seeing my property tax bill stamped “Paid” when I pay it, myself.  Yes, it hurts like hell to pay it, but pay it I do.

Also, it is just a few hundred bucks per year, but my better half has appealed our property tax bill herself the past two years and succeeded in getting it reduced.

I joke with her that it is almost offensive to me how low they think our property is worth.  Even though our tax bill is high enough at $5,200 per year, the Cook County Assessor has lowered its estimated property value at only around $200,000 even though I would not even consider selling it for under $240,000.

Anyway, I thought that the $1,443 number was fascinating.  Even in my own existence, I know people who pay three or four times this amount.  My aunt and uncle pay this amount in property taxes alone, but I realize that they are well within the top five percent of earners in the U.S.  I say “they,” but it is my recently-retired uncle who made anywhere from three hundred grand to half a million per year for quite a few years.  My aunt, whom I love dearly and regard in the highest esteem possible was a stay-at-home mom, and a great one at that.  

My wife’s brother and his wife probably spend less than $1,443 per month for housing.  They rent an apartment in rural Wisconsin that we have not seen, but I highly doubt that it costs $1,400 per month. Maybe half of that.  They are among the millions of Americans that struggle with their housing costs.  They were homeowners prior to the Recession but, like millions of other families, lost their modest home to foreclosure.

But this is not about me, my rich uncle or struggling brother-in-law in Wisconsin.

I wonder what your monthly tab is to own your home if you are a “homeowner.”  I always use quotes for words like “homeowner,”  “purchasing” and “owned” because after residing in our house for nearly seventeen years (since Labor Day right before 9/11), we “own” about the same amount of our home that our lender does.  Even when your mortgage is paid off in states like Illinois, it would be hard for me to feel like a homeowner because if and when that day ever comes for us, I know one thing for sure.

Our property taxes will be much higher than a Benjamin a week.

That is why my own dream is to join the Exodus out of Illinois.  But that is a post for another day.