Shifts in Homeowner Expenses: How Property Taxes and Insurance Are Impacting Budgets

A recent study by Neighbors Bank highlights a shift in homeowner expenses, revealing that a greater portion of monthly payments in the U.S. is now allocated to property taxes and home insurance rather than just mortgage payments. Analyzing 450 metropolitan areas, the study found that these costs make up approximately 21 percent of the average monthly mortgage payment nationally.

The economic burden of property taxes and home insurance is most evident in regions like Pensacola, Florida, where these expenses can rival mortgage payments. This trend is part of a broader affordability challenge in the housing market, exacerbated by increasing home prices and high mortgage rates.

Rocket Mortgage reports that average monthly mortgage payments rose to $2,329 last year, up from $1,924 in 2023. Rising property taxes and insurance premiums are significant contributors to this financial strain. The Federal Reserve noted a dramatic rise in home insurance costs—from $39 per unit per month in 2019 to $68 in 2024—driven by natural disasters.

Five of the ten metro areas facing the highest costs are in Florida and Illinois, each with unique issues. While Florida homeowners face high insurance premiums, Illinois residents are more burdened by elevated property taxes. In Pensacola, these expenses constitute 43.6 percent of the average homeowner's monthly mortgage payment.

Jake Vehige, president of mortgage lending at Neighbors Bank, emphasized understanding these recurring costs' impact. He stated, "They’re recurring costs that need to be planned for from day one," highlighting potential financial pressures. Interestingly, in high-cost markets like Honolulu, the share of property taxes and insurance is low due to affordable taxes and stable insurance.