Survey: How well do Americans anticipate the costs of homeownership?

Key takeaways:

  • Over a third of Americans said they underestimated the costs associated with homeownership.
  • 44.9% of homeowners said that home maintenance costs proved to be higher than they expected.
  • 1 in 2 homeowners have had to put a home improvement project or new appliance on a credit card.
Surveys

Regardless of age or prior experience, buying a home is no small undertaking. People often spend considerable time learning about financing, consulting listings in their desired area and determining their budgets – not only for the sale price of the house, but the many costs of homeownership that come after signing on the dotted line.

Many of these costs can be difficult to estimate, and sometimes they even catch homeowners off guard completely. We surveyed over 1,000 current homeowners about the cost of their home and what home-related expenses surprised them. Additionally, we tasked them with estimating the cost of various home maintenance costs. Continue reading to find out how savvy homeowners are when it comes to home costs.

Assessing the initial sale

Gauging home costs

We first wanted to see how homeowners felt about the initial transaction of their homeownership journey – the price they paid for the home. The average home cost people reported was $219,204. This is fairly close to the median home price for the entire U.S., which is nearly $230,000.

As far as most of the people we surveyed were concerned, the price they paid was fair. Almost 74% of homeowners said they paid a good price for their home. However, 13.2% of homeowners believed they overpaid, with women more likely than men to believe they paid too much for their home.

The costs of homeownership don't stop after a total price has been determined, though, and people seemed to be less confident in anticipating those costs. Over a third of people said they underestimated the other costs associated with homeownership before they made their home purchase.

Blind spots in home costs

Homeowners knowledge of home costs prior to buying

Knowledge of homeownership costs comes with research and experience. A majority of people said they had a moderate to high amount of knowledge about homeownership before purchasing their first home. However, 29% said they had low or very low knowledge prior to becoming a homeowner, with millennials being the most likely to say this.

So what costs were people overlooking as they prepared to have a home of their own? Maintenance costs were the cost people were most likely to say they were unaware of (34.8%). This was followed by property taxes (23.2%).

But even if they knew what type of costs to expect, homeowners didn't always anticipate how expensive those costs could be. Again, maintenance costs and property taxes were the most likely to trip people up, with about 45% and 36% saying that those costs were higher than they anticipated, respectively.

In a bind

Caught off guard by cost

Even the best laid plans can go awry. Homeowners seemed to have experienced their fair share of this. One in 2 said they had to pay for a home improvement project or new appliance with a credit card due to not having the necessary cash on hand. While it can be savvy to use credit cards on big purchases to rack up points, paying interest on the purchases due to lack of cash on hand just adds more to the total cost. This is a reason why many experts recommend people have emergency funds set up to cover unexpected costs.

Additionally, 3 in 5 homeowners said they had spent more than they planned on a home improvement project. A number of projects have a good chance of costing more than anticipated, so it's recommended that homeowners build in a 10%–20% buffer in their budgets when considering home improvement endeavors.

Testing homeowner knowledge of appliance life spans

Do homeowners know the typical life span of their home's appliances?

Many of the homeowners we surveyed had clearly had some unpleasant surprises in terms of home-related costs before. This led us to wonder what was behind those mishaps. We decided to put homeowners' knowledge to the test to gauge how much they knew about home maintenance costs.

We first looked at how well people knew the typical life spans of their appliances, comparing their estimates to those put out by the International Association of Certified Home Inspectors. On the whole, homeowners actually underestimated the life expectancy of several major home appliances. For example, people estimated that the median life span of a furnace was 12 years, when they actually can last anywhere from 15 to 25 years. Similarly, people thought a stove/oven was good for a median of 10 years, but they really can last up to 18.

An important note, of course, is that appliance life expectancy depends greatly on how well they're taken care of. There are definitely steps homeowners can take to extend the lifetime of their appliances (and delay the expense of new ones). Many of these are as simple as keeping them clean and replacing filters.

Off the mark on new appliance and repair costs

Do homeowners know the typical cost of their home's appliances?

It was a much different story when homeowners estimated the cost of new appliances and appliance repairs. Their ability to estimate these costs varied much more and offered a possible explanation for why some had reported underestimating costs in the past.

The only appliance for which respondents correctly estimated the typical new cost was a refrigerator. For all other appliances, it was a matter of just how much people were off in their guesses. The appliances people were furthest from estimating correctly were air conditioners and furnaces, for which their estimates were off by at least $1,700.

Don't be caught off guard

Homeownership is bound to come with a few mishaps for anyone. While most of the homeowners we surveyed felt good about the prices they paid for their homes, many faced surprises after closing. Homeowners reported being unaware of maintenance costs and property taxes (or at least not aware of exactly how pricey they can be).

We saw this play out further when homeowners were asked to estimate the cost of new appliances and appliance repairs, where they struggled to accurately estimate the actual median costs of these things. Women were slightly better than men about getting close with their estimates, but we still found major gaps in their perceptions of real costs.

Luckily, you don't have to get surprised by unexpected home costs. Cinch Home Services offers an affordable and award-winning home warranty that controls the cost of appliance and system breakdowns. With sufficient appliance protection, you can worry less about unexpected large expenses. Visit Cinch Home Services today to learn more.

Methodology

We surveyed 1,019 current homeowners about their experience with estimating and anticipating various costs associated with homeownership. Respondents were 51.3% women and 48.1% men. Three respondents were nonbinary, two were genderqueer, and one respondent chose not to disclose their gender. The average age of respondents was 41.5 with a standard deviation of 12.2 years.

Data on homes costs people were unaware of prior to owning a home and home costs that were higher than homeowners expected were asked as check-all-that-apply questions. Therefore, percentages won't add to 100.

Respondents were asked to estimate the cost of various common home repairs, as well as the life span and cost of appliances. The median was calculated for their responses, meaning that half of respondents estimated a lower cost than the median and half of respondents estimated a higher cost than the median.

When finding the actual median costs of repairs and new appliances, we consulted a variety of sources, gathering ranges of potential costs. We consulted sources such as kitchens.com, homedepot.com, fixr.com, homewyse.com, angieslist.com, and others to calculate an approximate median cost for each. However, it should be noted that costs can vary considerably based on location and scope (for repairs) and features (for appliances).

Data on the typical life span of appliances were compiled from information provided by the International Association of Certified Home Inspectors.

Limitations

The data we are presenting rely on self-report. There are many issues with self-reported data. These issues include, but are not limited to, the following: selective memory, telescoping, attribution, and exaggeration.

Fair use statement

Homeownership includes so many factors that it can be difficult to stay on top of everything. If someone you know would benefit from the information in this project, you may share for any noncommercial reuse. Please link back here so the entire project and its methodology can be reviewed. This also gives credit to our hardworking contributors who make this work possible.