For generations, owning a home has been considered a cornerstone of the American Dream—a symbol of financial security and long-term stability. But for many modern homeowners, that dream is becoming increasingly difficult to sustain. A growing number of households are finding that the costs of property taxes and home insurance have ballooned to the point where they now exceed their monthly mortgage payments. According to recent data from Intercontinental Exchange, these combined expenses accounted for 32% of the average mortgage payment in 2023, the highest share ever recorded.
The rapid escalation of insurance premiums and property taxes can be traced to several key factors. Natural disasters, including hurricanes, wildfires, and hailstorms, have caused catastrophic damage across the country, forcing insurance companies to raise premiums to cover their losses. Meanwhile, inflation and rising construction costs have made repairs and rebuilding far more expensive.
“Property insurance is seen as a necessity in our disaster-prone area,” said Steve Sherman, a research scientist for the Kinder Institute. “So its unaffordability has implications beyond just home prices; it also raises questions about how ‘safe’ making a home here really is.”
On the tax side, surging property values have led to higher tax assessments. Even if home prices stabilize, these inflated valuations often result in lasting increases in annual tax bills. In cities like Rochester, NY, property taxes now account for over 35% of the average monthly mortgage payment, far surpassing the national average.
Lisa Sturtevant, the chief economist at Bright MLS, commented, “Mortgage rates are not going to come down as much as we had expected, and affordability will still be a challenge.” This perspective underscores the growing unease among both current and prospective homeowners.
The Human Impact: Families Under Financial Strain
For homeowners like Michael and Lisa Landry in New Orleans, these rising costs are more than just numbers on a spreadsheet—they’re life-changing burdens. The couple now pays $2,448 per month on property taxes and wind and hail insurance, far exceeding their fixed mortgage payment. “Had I known what I know today, we would not have moved here,” Michael Landry admitted.
Their story is not unique. In Miami, Omaha, and Syracuse, homeowners are allocating over half of their monthly housing budget to taxes and insurance. Janet Raggi, a retired homeowner in Bradenton, Florida, is also feeling the strain. “We got a great house for a great price with great interest rates, and now that’s all turned on its head,” she said. Her property taxes, home insurance, and homeowners’ association fees have risen sharply in recent years.
For older homeowners on fixed incomes, the situation is even more precarious. Many planned their retirement budgets around fixed mortgage payments, only to see those plans unravel due to escalating insurance and tax costs. “Even if their mortgage payment went away 10, 15, 20 years ago, they’ve done the math for their retirement based on increases of some kind, but not these massive ones,” said Joshua Stewart, director of federal policy and advocacy for Fahe, a network of nonprofit housing organizations.
The consequences are dire: some families are forced to sell their homes, while others risk going without insurance altogether—a dangerous gamble in disaster-prone areas. According to Sharon Cornelissen, director of housing at the Consumer Federation of America, 6.8% of homeowners reported going without home insurance in 2023, with cities like Miami seeing uninsured rates as high as 21.2%.
Trends in Home Insurance and Property Taxes
Home insurance premiums have surged by over 50% since 2020, driven by increased natural disaster claims and rising construction costs. In high-risk areas like Miami and New Orleans, annual premiums average around $17 per $1,000 of policy coverage—three times the national average.
“Not only are homeowners paying 12% more today for the same dollar amount of coverage than they were, on average, from 2013-2022, but they’re also insuring a smaller share of the property’s underlying value,” said Andy Walden, Intercontinental Exchange’s vice president of research and analysis.
Property taxes have also followed a steep upward trajectory. In some regions, reassessed property values have caused tax bills to spike by more than 25% since the pandemic began. States with historically high property taxes, such as New York, Texas, and Illinois, are seeing the most pronounced impacts.
A Ripple Effect on the Housing Market
These escalating costs are reshaping the housing market in profound ways. Prospective buyers, already deterred by elevated mortgage rates, are further dissuaded by the long-term burden of rising taxes and insurance premiums. In some regions, these costs are beginning to depress home values as buyers factor them into their affordability calculations.
Existing homeowners who had hoped to refinance or sell are also feeling trapped. Even those with low fixed mortgage rates are finding it difficult to manage the rising variable costs of taxes and insurance. “It creates an environment where you have less of your budget to spend on the mortgage itself,” said Andy Walden. “That drives down the price that people are willing to pay.”
Experts warn that these trends show little sign of reversing. Insurance costs are projected to rise another 10-15% in the coming year, while property tax burdens are expected to remain high. Without meaningful intervention—whether through policy reforms, increased oversight of the insurance industry, or adjustments to property tax assessments—homeownership will become increasingly out of reach for middle-class families.
The challenges facing today’s homeowners are not insurmountable, but they require action. Policymakers must address the root causes of skyrocketing insurance and tax costs, while homeowners need better tools and resources to navigate these financial pressures.
For many, the American Dream is still alive—but keeping it within reach will require systemic changes to ensure homeownership remains an achievable and sustainable goal for future generations. As Lisa Landry poignantly said, “Had we known then what we know now, we might have made very different choices.”
FAM Editor: One must examine the insurance industry as having a “socialist”flavor. Insurance was originally designed for protection in the event of disaster, but has become the service we use for the most minor of accidents. And in true socialist form (and much like in the health care industry), it isolates the homeowner from the price of repairs and forms a spiraling mechanism for the prices of repairs, and subsequently for the insurance covering them – which doesn’t care, because the rates will go up to cover the increases. It is a nasty cycle.
Inspired by insights from The Wall Street Journal
