14 Ways Homeownership is Overrated

Conventional wisdom says homeownership is your ticket to building generational wealth, demonstrating your independence, and achieving financial security. So, it’s no surprise that around 57% of Americans feel pressured to buy a home.

But is homeownership all it’s cracked up to be? That is something that has sparked more and more debate over the past several years. There are both pros and cons, as homeownership as can help you grow your wealth.

However, there is a huge cost issue with homeownership that many believe doesn’t make it worth it anymore. Here are 14 of the biggest downsides to consider before purchasing a home.

Experts recommend saving around one percent of the total purchase price of your home per year for maintenance costs. For example, a $300,000 home would require $3,000 per year in savings.

In a rental, you can expect to cover minor expenses — like a scratched wall or chipped paint. Your landlord will likely cover routine maintenance expenses, though.

Over a third of homeowners live in an HOA community, paying an average of $291 per month in HOA fees.

That’s an additional $3,500 per year on top of your mortgage, taxes, insurance, maintenance, and other fees. You may find yourself needing to earn extra money to pay for ownership costs.

Appreciation — or the value of property increasing in value over time — is touted as one the most compelling reasons to purchase a home. However, appreciation is often overestimated and isn’t guaranteed.

According to the Journal of Housing Economics, homeowners overestimate the appreciation of their homes by 8%. In fact, since 2022, home prices have gone down an average of 2.6%.

If you plan to buy a home and hold onto it for a long period of time, it might be a wise investment. But in the short term, it might not garner the returns you expect.

According to a 2022 study by Hippo, 78% of homeowners have had regrets about purchasing a home within the previous 12 months.

Respondents cited misunderstanding the expenses related to owning a home, having too many unexpected issues arise, and dealing with too much maintenance and upkeep as points of frustration.

Many homeowners believe that property taxes were more expensive than they initially thought. In 2023, homeowners will spend an average of $2,795 on property taxes.

However, this expense can vary drastically based on your location. For example, a $500,000 home in Dallas, Texas can cost you around $11,000 per year in property taxes alone but it would be much less in Nevada.

When renting, damage that isn’t caused by you is typically covered by your landlord. However, when you own a home, that expense is completely your responsibility.

Some unexpected expenses — like a flood damaging the drywall or broken furniture from an earthquake — can leave you spending thousands of dollars on repairs that you weren’t expecting.

If you’re loyal to a specific location and can't imagine yourself leaving, purchasing a home there might be a solid decision. Otherwise, it can leave you stuck in a single location for longer than you’d like.

If you desire something new, accept a job in another city, or want to move for any other reason, you’ll need to embark on the journey that is listing and selling your home.

With a rental, it’s easier to simply break or finish off your lease, pack up, and move on to greener pastures or move on to a little variety.

Mowing the lawn, trimming the shrubs, and organizing the garage aren’t everyone’s idea of leisure. But, if you purchase a home, much of your free time will now be dedicated to it.

Homeowners spend an average of 90 minutes per day on household activities, while renters spend just 67 minutes.

Over the course of a year, that’s over 141 hours, or around 6 days, that renters save. Just that time alone could allow you to spend more time with family or take on a new hobby.

In the largest metro areas, at least 61% of renters can’t afford to purchase a home within the city.

Given that costs tend to be cheaper in suburbs, homes outside the city might be the only ones in your budget.

If living in the heart of the city is important to you, homeownership in the ‘burbs might not be ideal.

Many Americans use a mortgage to finance the purchase of their home. In 2022, the average mortgage balance was $236,443 — which is one massive loan to constantly be paying off.

Debt can cripple an individual if they fall on hard times. While real estate debt is considered a good thing, it might not be a good fit with your long-term financial goals.

If you’re looking to plant roots, have children, or retire in one area, purchasing a home might make sense.

However, if you’re young, looking to travel, or planning to relocate, purchasing a piece of property could become a burden.

Apartments are often complete with an array of amenities — a swimming pool, fitness center, covered garage, and more.

If you purchase a home, it’s your responsibility to add those amenities if your home doesn’t already include them or you’ll simply go without.

Given that installing an inground pool costs around $35,000 alone, adding the amenities you want might not be within the budget.

Homeowners with fixed-rate mortgages will see consistent payments. However, if you have an adjustable-rate mortgage, your interest rate could change over time.

On a $320,000 mortgage loan with a 6.7% starting interest rate, just a 2% increase could increase your monthly mortgage payment by $441 per month.

That’s an additional $5,292 per year — not an amount that’s simple to find in your budget. Knowing what your rent will be for the next year might be more appealing.

Whether you rent or buy, it’s wise to purchase insurance. In most cases, however, homeowners insurance will be significantly more expensive than renters insurance.

With Progressive, a rough estimate shows that a renter’s insurance costs just $14-$30 per month, but homeowners insurance can cost $81-$138 per month or more.

With renter’s insurance, there are only a few factors that impact the pricing — location, type of residence, insurance score, and coverage. With homeowners insurance, factors like pools, trampolines, pets, home businesses, and roof types can all increase the rate you pay.

Homeownership can be a wise financial decision, but only if you believe the pros outweigh the cons. More and more people are starting to find renting to be the superior option

When you rent then your payments will be locked in and you won’t find yourself scrambling, which is especially important if you’re trying to move beyond living paycheck to paycheck.

The end benefit to homeownership also may not be as appealing as many believe it is, especially if the home isn’t owned for many years prior to a sale. However, only you can decide which path is right for you.