Analysis: Black Homeowners Could Spend $100K On Extra Home Costs In Just Over Five Years

Lowering the price range for a home you plan to buy could potentially leave you with a larger budget to cover extra housing costs.

Homeownership is highly regarded as a vital wealth builder and a measure of success for Black Americans.

However, achieving that status can also come with roses and thorns for many of those individuals.

New data reveals that 85% of Black homeowners report that at least one of the expenses associated with owning a home, such as maintenance, renovations, or taxes, has exceeded their initial expectations.

Matt Brannon, author of “The True Cost of Homeownership 2024 Data,” emailed BLACK ENTERPRISE with the eye-popping revelation and data on Black Americans and homeownership. The data showed that the average cost of homeownership for all Americans rose by $499 from last year—$17,958 versus $17,459. That is up nearly 3%, and research shows it is just under last year’s overall inflation surge of 3.4%, partly fueled by housing costs.

Brannon’s report indicates homeowners, including Black Americans, could spend $100,000 in extra expenses in only five years and seven months beyond their mortgage obligation. The costs could range from over $5,300 for utilities to more than $1,500 for homeowners’ insurance.

Another troubling discovery: About 27% of Black homeowners have dipped into their retirement savings to afford the costs of owning a home, as opposed to 22% of all Americans.

Brannon stressed a person would mainly dip into their retirement savings to cover the costs of homeownership if they couldn’t get the money elsewhere. He says borrowing from retirement can significantly set a person back down the line because they need to catch up on the potential growth of that money through investments.

He pointed out that if you have a lower income and you’re stretched thin financially, you might make that sacrifice. “The latest data shows us that, while Black households have closed the gap a bit, on average they still earn about half the annual income of white households.”

He also addressed whether building equity is why Black homeowners should not be envious of renters who don’t have to pay for maintenance. Bannon stressed that building equity is a plus. Yet, he said the risk is that a person may focus on the pros when buying a home and overlook the cons, causing problems for themself down the line. “The benefits of homeownership can be very fruitful, but it’s not without its downsides, especially if it’s causing you to overextend your budget.”

Further, some 65% of Black homeowners have regrets about their house and 55% feel some level of home buyer’s remorse. Also, 34% of Black homeowners declare the cost of owning a home has negatively impacted their finances.

Those findings are contrary to experts contending that homeownership is among the ways Black Americans can build wealth and cut the racial gap between them and other racial groups.

Brannon agreed that the points on home ownership can seem at odds with each other. Still, he sees that as the difference between general financial rules of thumb and individuals’ unique financial circumstances. “It can set you up for a solid financial future or can be the thing that ruins your finances.”

So, what actions should Black Americans consider taking now to make home ownership costs less expensive?

Brannon said the first way to make homeownership more affordable is to lower the price range of the home you buy. If you can get approved for a mortgage on a $300,000 house, that doesn’t mean you should buy a $300,000 house. He added that getting a $250,000 home might be worthwhile and using the leftover to budget for regular and irregular housing costs.

He also said that people can make homeownership more affordable by prioritizing increasing their credit score before applying to help get a lower interest rate. “A difference of one percent can add up to thousands of dollars in additional costs over the life of a loan for a 30-year mortgage.”