For most Americans, the homebuying journey is daunting in and of itself — without even thinking about the expenses that follow once they check that milestone off their list. And, with the national down payment averaging $85,100, homeownership-related costs risk breaking the bank even before considering recurring mortgage payments, homeowners’ insurance, and property taxes. Still, the cost of that first year as an owner is a beast of its own that cannot be ignored — particularly in the big city. And Scottsdale is among the Top 15 cities in the U.S. with most expensive first year of homeownership.
- In the 100 largest U.S. cities, the cost of the first year of homeownership ranges between $25,100 and $389,900 — which is a staggering 15 times the lower amount.
- First-year expenses are less than $80,000 in 16 big cities, most of them in the Midwest. Detroit and Ohio’s Toledo and Cleveland top the list of markets with the cheapest homeownership costs.
- Homeownership costs go above $200,000 in 15 other markets, 11 of which are in California. Alongside San Francisco, the most excessive first-year expenses are in Fremont, San Jose, Irvine, and Los Angeles.
- In 75 markets, it takes more than a decade of saving up to cover the full cost of the first year of homeownership. The average homebuyer is particularly priced out in LA, NYC, and Irvine, CA, where matching the amount would require more than 20 years.
Point2 wanted to see where new buyers would have a difficult time covering these expenses and where they could have a financially smoother first year of homeownership. We looked at the 100 largest U.S. markets to determine the costs associated with the first year of homeownership, focusing on two types of expenses: Upfront costs and annual recurring costs.
Upfront costs consist of a set 20% down payment, as well as closing costs such as origination charges, title insurance, inspection fees, and other service fees. Annual recurring costs include mortgage payments (assuming a 30-year fixed-rate mortgage with an average interest rate of 6.78%), homeowners’ insurance, and average property tax.
For a clearer glimpse into what first-time buyers are experiencing, we analyzed the number of years it would take for the average renter to save up for the upfront costs required to buy, as well as how many years it would take to cover the full cost of the first year of homeownership.
Costliest 1st Year of Homeownership: Almost $390K in San Francisco & Fremont
First-year costs cheaper in Los Angeles than in San Jose & Irvine, CA
Understanding more about the down payment and closing costs — as well as subsequent recurring costs, such as mortgage payments, insurance, and property taxes — can help homebuyers plan their budget effectively. But no amount of budgeting prepares the average buyer for the first year of homeownership in the more expensive cities in the country.
In 15 of the 100 largest markets, the full cost of the first year of homeownership exceeds $200,000. Understandably, these are the same cities that have some of the highest median prices in the U.S., as well as the most expensive 20% down payments that range from $143,600 to a wallet-wrenching $282,000 (looking at you, San Francisco).
With total first-year costs of $389,900, San Francisco is the most unaffordable for new owners. On top of a median home price of $1.4 million and the highest down payment on the list, the average first-time homebuyer here also faces the steepest mortgage (more than $88,000), as well as annual property taxes of more than $10,400.
San Francisco is closely followed by Fremont with year-one costs of more than $389,100, as well as six other California cities — all with homeownership expenses exceeding $236,000: San Jose, Irvine, Los Angeles, San Diego, Oakland, and Anaheim.
On the opposite coast, navigating costs as a fresh homeowner is tough in New York City, too. Although scenarios might look different borough by borough, homeownership expenses in NYC reach nearly $233,600 during the first year. Likewise, newly-minted owners face a similar situation in Seattle ($232,530), as well as in a few other large markets where homeownership-related costs during the first year go above $200,000 – Scottsdale, AZ, Boston, MA, Long Beach, Chula Vista, and Santa Ana, CA. Incidentally, the vast majority of these expensive large markets are located in metro areas that are expected to keep seeing spikes in home prices, as well as mortgages, in the months to come.
Cheapest 1st Year of Homeownership: Only 16 Big Cities With Homeownership Costs Below $80,000
First-year expenses 5 times cheaper in some Midwestern cities than in California
The homeownership rate in the United States has been hovering around 66% lately. And, although fluctuations are to be expected, there is little hope of the needle suddenly moving more in favor of homebuyers. Rather, climbing interest rates, high prices, and squeezed inventory create a cocktail doomed to make some people postpone homebuying — and others rethink the decision altogether.
It’s essential for aspiring homebuyers to see the full financial picture of the first year of ownership in deciding whether to go for it or wait it out. Plus, with first-year homeownership costs surpassing $100,000 in one-third of the country’s 100 largest markets, it’s no wonder many choose the latter.
Yet, despite the tough financial journey of first-time buyers, there are some large cities where going for it might be the right answer. More precisely, in 16 of the largest U.S. cities, the cost of homeownership falls below $80,000. Notably, this benchmark feels more like a best-case scenario the more you look into the six-digit costs in most of the other large markets.