To understand the cost of buying a house you need to know what’s going on in the market and what you can afford. It means breaking down how home prices are determined and planning for both upfront and ongoing costs so you can make informed decisions about homeownership.
Factors Affecting Home Price
National and Regional Home Price Trends
Current US home prices. The median home price gives a better picture of the market than averages as it’s the middle point where half of all homes sell for more and half for less, avoiding distortion by extremely high or low prices. In October 2024 the National Association of Realtors reported a median price of $407,200 for existing homes, up 4% from October 2023 and the market is still trending up.
Prices by state and region. Home prices vary greatly by region. For example, the Northeast has a median price of $472,900, the Midwest is more affordable at $305,300. The South has a median price of $361,200 and the West is the most expensive at $627,700. Affordability also varies by state with areas like Hawaii and California having high median prices and Ohio and Michigan more affordable for buyers.
Most and least affordable metro areas. Housing affordability varies widely across the US. In cities like Pittsburgh and Cleveland a household income of $58,232 and $70,810 respectively is enough to buy a typical home making them some of the most affordable metro areas. Cities like San Jose ($454,296 income needed) and San Francisco ($339,864 income needed) are among the least affordable. These extremes show how local demand, income levels, and market conditions impact housing costs in different areas.
Important! Home prices are just a benchmark and can change fast so focus on your desired area for the most accurate affordability.
Location Impact
Urban vs. suburban vs. rural differences. Urban areas, especially big cities like San Francisco have much higher home prices than suburban and rural areas. For example, the median sale price of a home in San Francisco was $1.5 million, according to the latest data. Suburban areas have more affordable housing options, with median home prices ranging from $300,000 to $600,000, depending on how close they are to urban centers. Rural areas are the most affordable, with median home prices often under $200,000, but these may come with trade-offs like longer commutes and fewer amenities.
Examples of how location affects costs. Closing costs and fees vary greatly by location. For example, states like California have higher property and transfer taxes which adds to the overall cost of buying a home. Regional differences in cost of living also impact fees like attorney fees, title insurance, and appraisal fees. In high-cost areas, these fees are higher and add to the total cost of buying and owning a home. States with lower tax burden and cost of living like Ohio or Michigan have lower home-buying costs.
Property Type and Size
The type of home you choose impacts the price. Single-family homes are the most expensive due to the larger lot size and more privacy. Condominiums are more affordable since they share common areas and often have lower maintenance costs. Townhouses are the middle ground, private living areas with shared walls and community amenities.
Size also matters. Larger homes with more bedrooms, bathrooms, or additional features like garages or basements cost more, not just in purchase price but also in property taxes and maintenance. Buyers should consider their space needs and budget to get the right balance.
Mortgage Rates and Financing
Mortgage rates in 2024 have been all over the place, following the overall economy and Fed policies. For a 30-year fixed-rate mortgage the rates have been between 6.08% and 7.22% over the past year. For a 15-year fixed rate mortgage the range has been 5.15% to 6.47%. This shows how market conditions can affect borrowing costs so homebuyers should keep an eye on rate changes and lock in good terms when rates are low.
Financing options are based on personal financial factors. A higher credit score means better mortgage rates which can save thousands over the life of the loan. A bigger down payment means a smaller loan amount which means lower monthly payments and no need for private mortgage insurance (PMI). Loan types like fixed-rate or adjustable-rate mortgages also impact affordability, fixed rates offer stability and adjustable rates may start lower but increase over time. Buyers should consider all these factors to get the best financing terms.
{{ post.uiPromoBlock:ui }}
Total Cost of Buying a Home
The total cost of homeownership is divided into two main categories: Upfront costs and Ongoing costs. Upfront costs are one-time costs during the home-buying process. Ongoing costs are the regular costs of homeownership.
Upfront costs can be as low as 2% or as high as 25% of the purchase price of the home depending on your financial decisions. Ongoing costs are the continuous financial responsibility you need to plan for to make homeownership affordable long-term.
Upfront Costs
Earnest Money
Down Payment
Closing Costs
Prepaid Costs
Reserves for the Lender
Moving and Setup Expenses
Ongoing Costs
Monthly Mortgage Payments
Property Taxes
Insurance
HOA Fees
Utilities and Maintenance
Emergency Repairs
Cost Breakdown Example
Let’s look at the expenses for buying a $300,000 home with a 20% down payment with a 15-Year Mortgage at 6%.
Upfront Costs
Down Payment- $60,000 (20% of the home’s price).
Closing Costs ~ $7,200 (3% of the loan amount).
Reserves - $4,056 (two months of mortgage payments).
Total Upfront Cost ~ $71,256.
Ongoing Monthly Costs
Mortgage Payment ~ $2,028 (principal + interest on a $240,000 loan).
Property Taxes ~ $270 (1.08% of the home’s value annually).
Homeowners Insurance ~ $150.
Utilities and Maintenance ~ $700.
Total Monthly Costs ~ $3,148
Final Home Cost (over 15 Years)
Total Loan Payments - ($2,028 x 180 months) $365,040.
Total Home Cost - (Upfront + Loan Payments) $436,296.
Although the home’s purchase price is $300,000, financing it with a 15-year loan at 6% raises the total cost to $436,296, excluding ongoing costs like taxes, insurance, and maintenance. This highlights the importance of understanding how loan terms and interest rates affect your long-term financial commitment.
Conclusion
Planning is key because the true cost of buying a home is influenced by many factors including regional market conditions, property type, mortgage rates, and ongoing maintenance costs. Buyers need to consider both upfront costs - down payment, closing costs, prepaid expenses - and long-term responsibilities like property taxes, insurance, HOA fees, utilities, and emergency repairs. By understanding and preparing for these variables homebuyers can determine affordability, choose the right mortgage, and be financially prepared not only to buy a home but to maintain it over time.