While buying typically presents a lower monthly housing (mortgage) payment than renting comparable property, most homebuyers aren’t fully aware of the extra costs of homeownership. This is important because renters become first-time homebuyers for two primary reasons:

  1. to fulfill the American Dream of homeownership; and (more importantly)
  2. to save money.

A recent report on the hidden costs of homeownership by Zillow and Thumbtack (a home maintenance site) analyzes these costs often overlooked by first-time homebuyers, including:

  • property taxes;
  • homeowners insurance;
  • utilities; and
  • the most common homeowner maintenance expenses, which are:
    • house cleaning;
    • lawn mowing;
    • landscaping;
    • carpet cleaning; and
    • specific regional costs like air conditioner maintenance, gutter cleaning, snow plow and pest removal.

These “hidden” homeownership costs add up to a national average of $9,477 per year. In California’s top metro areas, costs are higher, at:

  • $11,333 in Los Angeles;
  • $10,647 in San Diego; and
  • $13,287 in San Francisco (the second highest in the nation, after Boston, MA).

Why are extra homeownership costs higher than average in California?

One possible reason is the additional costs specific to this region, specifically the cost of air conditioner maintenance and landscaping in Southern California’s year-round warm weather. However, in other warm climates like Phoenix, AZ, and Las Vegas, NV, extra homeownership costs are actually below average.

Further, the cost of homeowners insurance in California is on par with the national average of $1,000 per year, according to ValuePenguin. However, many California homes are situated in earthquake fault zones, and some have additional earthquake insurance to cover the risk of loss. 11% of California homes (including both renter- and owner-occupied homes) have an earthquake insurance policy, according to the California Earthquake Authority. This is high for the nation, and adds a substantial cost for those who opt into it.

The bulk of the difference comes from California’s high cost of living. Things just cost more in California, including the cost of domestic labor, which is included in the most common homeowner maintenance expenses cited in the report. There’s no getting around it, California’s pleasant climate and bountiful opportunities come with a price.

All the same, homebuyers shouldn’t necessarily be scared away by the high level of extra homeownership costs in California — not all homeowners hire a cleaner or lawn mower, as this analysis assumes. But there are definitely some extra costs new homeowners need to keep on their radar.

Occasional maintenance expenses can come out of nowhere and end up costing more than a homeowner has set aside. Therefore, homeowners are best served by setting up a savings account and a monthly deposit into that account to save for big expenses that come along every few years, like:

  • roof repair and replacement;
  • termite damage;
  • water damage;
  • mildew removal; and
  • appliance repair and replacement.

If your homebuyer is purchasing an older home, they ought to commit more savings per month into the maintenance account. Vice-versa for families buying new homes. To deter dipping into the savings account to fund other non-maintenance expenses, homeowners can put the money into a high-interest savings account, like a CD or bond fund. These accrue interest more quickly, but carry penalties for taking the money out before the account’s term, so homeowners will only take it out when they really need it.

Want to share information about homeowners insurance with your clients? Check out our real estate marketing letter:

FARM: Homeowners insurance