Insurance and Taxes Now Cost MORE THAN YOUR MORTGAGE...

You know a lot of people like to think that I'm like blowing things out of proportion or making things sound worse than they really are here. You're just fear-mongering Michael. But the reality is is that insurance and taxes now cost more than the mortgage payment for many homeowners across the country. That is not an exaggeration or an overstatement of any kind because these expenses have gone up so much that it's changing what it means to be a homeowner. Because you see for the longest time people said well it makes sense to be a homeowner. It makes sense to buy a house because your mortgage payment's fixed and you're never going to have to worry about your payment going up and blah blah blah blah blah. But that's no longer true. These expenses that used to be sort of stable over the years like your homeowner's insurance and taxes and of course your mortgage payment is fixed for the life of the loan. Assuming you got a fixed rate mortgage you don't really have to worry about much. That used to be the case but no longer is the case if you're a homeowner going into 2025. Right now nationwide across the United States taxes and insurance make up more than half of the monthly mortgage payment for about nine percent of single family mortgages. And that's up from less than four percent at the end of 2014. So this is a worrying trend that is continuing to go up not down. The number has more than doubled over the past 10 years. And just for the average homeowner about 32 percent of the mortgage payment is now going towards property taxes and home insurance. Also the highest going back to the year 2014. I mean just take a look at this graph guys. Back in 2014 it was about 29 30 percent and now it's of over 32 percent. So this trajectory is going nowhere but up. You can bet that this is going to continue going up because property taxes pretty much always go up unless you're smart and you protest it and you try to get those valuations lowered. Okay I've talked about that a bunch of times in the past. That's something you should definitely do whether you do it yourself or you hire a company to do it for you. You should do it. But homeowners insurance there's basically no way to get that to come down other than to move to a less risky market or area. Okay there are some things that your homeowners insurance company will tell you you can do like maybe get a new roof or you know remove certain things from your yard. There may be some things even force you to do to even keep your homeowners insurance. But there are some particular hot spots across the country where people are paying over half of their monthly mortgage payment on just their insurance and taxes and of course right here where I'm walking right now is one of them. Of course Miami is on this list. How could it not be right? But it's in other places too that you wouldn't really think of because they're not all in Florida. You have Rochester New York is in this situation. Syracuse New York is in this situation. You also have Omaha Nebraska. Not one that you would just think of right off top of your head you know. And then you'll have New Orleans. So of course New Orleans and Miami are like the obvious ones. These are the places that have been getting slammed with storms and seeing big insurance increases and things like that. But you probably wouldn't have guessed that it's happening in New York and it's happening in Nebraska too. All these areas I mentioned they have high property taxes and they have high home insurance especially relative to the cost of the home. And of course this just intensifies the affordability problem that we have here in this country. You know it's bad enough that prices are where they're at but the price doesn't even tell the full story. You know when you look at the price of the house that's only part of the story. Your mortgage payment is only going to be half in a lot of cases or only going to be 60 or 70 percent of your monthly payment. The rest is going towards taxes and insurance. And if you take a look at this bar chart here of the amount of people who are paying more than half of their monthly mortgage payments on taxes and insurance, these numbers are quite alarming guys. In fact Rochester and Syracuse, New York are at the top of the list even beating out Miami at 35 percent of residents there paying more than half of their payment just towards those two line items. And then of course you have the other ones we talked about Omaha, New Orleans, Miami, but it's also McAllen, Texas, El Paso, Texas, Houston, Buffalo, New York, New Haven, Connecticut. Even in New Haven, Connecticut 21 percent of folks there pay more than half of their monthly payment towards taxes and insurance. This is not just a Florida problem. And one of the biggest problems with half your mortgage payment now being taxes and insurance for a lot of people is this is coming kind of unexpectedly for a lot of people. Whether you just bought or you're somebody that has owned your home for a long time, you can get hit with this relatively quickly with no warning. So that's part of the other issue. And of course the people who are at most at risk of feeling the pinch from this are older homeowners who are living on a fixed income. And also new homeowners who just bought recently that have already maxed out their monthly budget come to find out that they're going to have to come up with another five six hundred dollars a month due to their tax and insurance bill going up next year. And this is something that I've been talking about on the channel here for a couple of years now. And a lot of people have just kind of laughed it off until it's now starting to happen to them or people that they know. And you know the situation is becoming so dire that even if you take away the mortgage payment, say you have a paid off house, that now you could be facing an unaffordable payment for your house just to cover the taxes and insurance now. And I know a lot of people are going to say, well if that's you and you find yourself in that situation, you can just ditch the homeowners insurance because that's a big portion of this. Obviously you can't stop paying the taxes, but you can ditch the homeowners insurance. That's what a lot of people are deciding to do. But that's a big risk that you're taking on as well. And say you're somebody who retired, you know, and then you did the math and you did everything right. You saved for retirement and you thought everything was going to be okay. You kind of adjusted for increased cost of living adjustments along the way. Well, nobody saw it coming where all of a sudden your property taxes get raised 36% in one year, like what's happening over in Pennsylvania. Once again, not just a Florida problem. They talked to this one couple when they bought their house in New Orleans in 2015, their property taxes, home insurance, and flood insurance cost $725 a month. Now, fast forward almost 10 years later, they're paying $2,448 a month for property taxes and wind and hail insurance. That exceeds their monthly payment for principal and interest on their mortgage, which they have a 3.5% fixed rate. And they pay another $2,000 a year for flood insurance and home insurance for other perils. So you guys can see that this is a huge problem that is just getting worse and worse. And this couple says for now, they can afford the increases that they've been facing. But the husband is already 70 years old, who's going to be retiring soon. And they need both incomes to continue to afford this house and these payments. So they're going to have no choice but to move. And they're going to find themselves in the same situation that I talked about in my video the other day where, you know, I can't afford to sell my house and I can't afford to keep my house. That's the unfortunate situation a lot of people in this age demographic are now finding themselves in. They bought this house and it used to be very affordable and now things have gotten blown out of proportion to the point where it's no longer affordable and you're hitting retirement age. So what do you do? They even said this. Listen, this is a quote from this couple that's paying all this money for this house in New Orleans. Had I known what I know today, we would not have moved here. Now, obviously nobody can see the future. Nobody could have known that we were going to end up in a situation like this. And so there's no way to know it right now, moving into 2025, where you can buy today that's going to protect you from this level of increases, because there are unforeseen events that just happen and there's no way to know that. But I think there are maybe a few things you can do, at least in my opinion, as somebody who has looked at a lot of real estate and sold real estate over the years. I feel like the best thing you can do is to look at buying a house in an area where it's still cheap right now. Not just the prices, but the taxes and insurance are cheap right now. Because if it's cheap right now, there's a good chance that it'll remain relatively cheap into the future. Is it going to go up? Yeah. Is it going to go up as much in places that are already facing the high cost now? No. Because the information you're uncovering there is twofold. Number one, you're already seeing areas that have lower property taxes and insurance right now. But that also means that insurance companies have relegated that risk to being pretty much a low risk area if you're not paying a lot in homeowner's insurance. Of course, that cost is going to go up in order to subsidize all the other disaster prone areas throughout the country. There's nothing you can do about that. But at least it's better than paying exponentially higher rates year after year and not even knowing what your payment is going to be next year. But that also could mean for a lot of people living in less desirable areas. A lot of these places that are cheaper and have low property taxes and have low insurance are in the middle of nowhere. They're not very close to jobs or city centers or desirable neighborhoods that a lot of people want to live in. So it really is a sacrifice on the other end. If you're looking to save money with your housing, you may have to sacrifice a certain type of lifestyle that you might wish you would have. And here's the reality, guys. An increase in home insurance or property taxes makes it more likely that a current homeowner will fall behind on mortgage payments. In fact, just between 2022 and 2023, the rising cost of homeowner's insurance led to an additional 149,000 mortgages becoming delinquent that otherwise wouldn't have happened. So this is a big serious problem for people who are looking at buying a home or who own one now. A lot of people here in Florida are facing this issue to the ninth degree right now. A lot of people are looking to sell and get out. That's why you're seeing so many listings hit the market right around the same time here in Florida, because everyone's getting hit with these increases at the same exact time. I talked to one woman who moved here from Nevada four years ago, bought a house in Bradenton. Now she's selling the house because her property taxes and insurance have gone up to an unaffordable level, and she wants to move back to Nevada, where she's from. That can also give you a clue and an idea of where people are moving back to in these situations, where it's more affordable. Clearly, in Nevada, they don't have much to worry about in way of natural disaster, and naturally are going to have lower home insurance premiums. Property taxes, I'm not sure, but definitely lower home insurance. In some areas like Miami, the amount of people who are going without insurance is an absolute disaster, guys. Miami is just a ticking time bomb waiting to happen. You got 21.2% of homeowners as of 2023 here going completely without homeowners insurance, and that's up from 14.5% in 2021. So if a major disaster were to happen here in Miami, a lot of people here are going to get wiped out. Here we have a house for sale, which they sold back in 2014 for $725,000, and then it was listed as a rental house for many years, as low as $3,800 a month actually at one point for this house. They decided to list it for sale back in October of this year for $4 million, and now they just cut the price down to 3.95 million, and now it's listed for rent for $14,600 a month. And why do you think that is? Part of it could be greed, but I guarantee you that the carrying costs for this house have gone up tremendously, like we were just talking about in this video. $14,600 might sound like a lot in rent, but imagine the insurance they have to pay on this house, guys. This is a waterfront house, a waterfront house in Miami. I don't even want to think about what the insurance bill is, probably well over $20,000, maybe even $30,000 a year. And if they have a mortgage, you can guarantee they're required to have flood insurance too. Property taxes, even though they only paid $700,000 for this house, the taxes have probably gone up substantially as well. Because the house is a rental and they don't have the homestead exemption, take a look at this. They're paying $26,000 a year just in property taxes as of 2023. That number is going to continue to climb. So a house that was once affordable, at least for this area, purchased for 700 grand, now they're trying to sell for $4 million and need to collect $14,000 a month just to be able to make something of it. No one's going to pay that, guys. This is probably going to be another one of those empty listings that's sitting here for months, if not over a year. We'll walk by again at some point before I go back to California and see what happened with it. But here is the one silver lining, with the property taxes and insurance rising as crazy as they have been, is that this is already leading to lower home prices in many areas across the country. And it will continue to make housing more affordable because sellers are going to have no choice but to come to terms with reality and charge less for the home, because people only have so much budget to spend on their monthly mortgage payment. And if more than half of it's being eaten up by property taxes and insurance, well then the only thing that gives is going to have to be the price. We've got our buddy over there, as usual, making lots of lovely noise over here. Rakes are a thing of the past, by the way. I talked to another guy who recently moved from Utah to Nebraska to take a new job. And he says nearly his entire pay increase has been eaten up by higher expenses. Their current mortgage rate is more than double the rate they had on their prior home. And property taxes and insurance account for 34% of their new mortgage payment. So this is just kind of the standard now. This is the norm. This is what you're going to be facing if you want to buy a house in 2025. The 34% is just the average number. You're lucky if it's 34%, because down in areas like this, it's 50% or 60%. And then you've got people saying, oh, don't worry. The bear market in home sales is over now. Because according to this firm called Ned Davis Research, they highlighted that the total single family home sales finally turned positive year over year after 39 months of consecutive declines. And they say that the only time this was outdone was the 43-month decline we had during the housing bubble from 2005 through 2009. And when you take a look at this graph here, you can kind of see what we're talking about. The top line, the blue line, is the affordability index. And actually, the higher this goes on the graph, then the more affordable homes are. And you can see between about 2006 through 2020, the affordability index was much higher than it is today. It has just plummeted ever since about 2021. That's because homes are nowhere near as affordable as they were during this timeframe. In fact, the affordability range is almost at a early 1980s on this graph. But the bottom part is the year after year single family home sales. And you can just see now, all the way to the right, that it's just barely starting to turn positive. And the past 39 months, we have seen a negative reading because it needs to go above that middle line for it to be a positive reading. And you can see throughout history, most of the time, is it's in positive territory. So it's not really normal for this to be negative. But here's the problem. In fact, there's a couple of problems. But the first problem is, the last time that we had this issue where we had the housing market in a bear market and home sales very low, we actually had affordability very high. When you look at that huge dip there, right around the middle of the bottom chart, at the same time, you saw the affordability index for homes rise tremendously. So houses were affordable back then. The houses are no longer affordable. Now that we're going through this second wave of single family home sales being in a downward trend, in a downward slump, we have affordability also at an all time lows, which leads me to believe that we're not going to see the recovery this time in home sales like they believe at this research firm. Just within a few blocks here in Miami Beach, they're building all these brand new either condo or apartment buildings. I'm not sure which, but those were all empty lots about seven months ago. But you know, these guys at this research firm are saying, oh, this is great news. This means that 2025, the housing market's going to be in recovery mode. Also, you know, the home builder stocks have been outperforming over the past few years. So this is a sign that 2025 is going to be a good year for the housing market. Newsflash for you, that's not true at all. Because of everything I just said, affordability is still record lows. So you're not going to see people rushing back in to buy simply because they can't. And whatever they're looking at, this blip on the chart was a period in time where interest rates went down a little bit. And you did have some people jump back into the market, which was enough to make this index turn positive. But don't expect a huge jump on the index moving forward. And a lot of these people who are supposedly locked into their home with the golden handcuffs and they have too good of a deal or they can't move, a lot of these people are going to be forced into moving because of all the reasons we just talked about. Because of the rise in property taxes and insurance potentially becoming unaffordable for a lot of people who have even these low interest rates locked in. And you can already see the effects that these things are having on certain housing markets, guys. And once again, it's not just in Florida. You know, look at Austin, Texas, for example. These guys have seen a massive decline in home prices over the past few years. And prices continue to fall in Austin, Texas. It's not making a recovery. Also, you see a similar situation playing out in Nashville, Tennessee. You're seeing San Francisco. Prices in San Francisco have dropped 30% from pre-pandemic levels, guys. 30%. In fact, San Francisco is in the midst of a housing crash right now. No matter how you want to slice it, that's the reality, okay? They arguably could be one of the worst markets in the U.S. right now when it comes to how much prices have come down. Of course, you're seeing it happen here in Miami, too. I'm showing you guys all of the listings that they bought for top dollar just a few years ago. And now people are struggling to turn any sort of profit and probably won't make any profit at all. And only one of these markets I even mentioned is in Florida. The rest of them are in Texas, in California, Tennessee. Now, in some other real estate-related news, the Consumer Financial Protection Bureau, they just filed a lawsuit against Rocket Homes, alleging that the real estate company provides incentives to brokers and agents to steer homebuyers to its parent company's mortgage lending wing, Rocket Mortgage. So, if you've ever worked with a real estate agent and they said, oh, you should use Rocket Mortgage, or you worked with a mortgage broker that tried to push you into Rocket Mortgage versus any other lender, there's a high probability that they might have been getting kickbacks from this, which is illegal. In fact, take a look at this, which I find kind of ironic because Rocket Mortgage was one of the first companies to come out with the 1% down mortgage. And then later this year, a 0% down mortgage for people that qualify. They said that Rocket Homes pressured real estate brokers and agents not to share information with clients about products not offered by Rocket Mortgage, such as the availability of down payment assistance programs, which often save the homebuyers thousands of dollars, according to the CFPB. So yeah, we're going to offer 1% down mortgages and 0% down mortgages, but you have to get it with us. The investigation also found that the company gave referrals and other incentives to brokerages under an agreement that they would refer real estate settlement business to Rocket Mortgage and a separate Rocket affiliate, Amrock, which handles title closing and escrow services. One real estate firm was referring thousands of clients to Rocket Mortgage and Amrock, and they were offering awards of $250 gift cards to agents who made the most referrals to its favored partners, which is just so low, guys. That is such a low payment. It's such a low reward or referral for pushing people into this one company. The fact that people even fell for this is super slimy and gross to begin with, but it's just crazy that agents would do this for a potential shot at getting a $250 gift card. So what? So I hope they actually do get sued and penalized for this big time because buying a house today is already so unaffordable and hard enough for so many people. The last thing we need is big corporations standing in the way of people being able to get the best deal on a house. Now, personally, I'm against people buying homes with 0% down or 1% down because like I've mentioned dozens of times here before, if you need a program like that to buy a house, then I can pretty much guarantee you, you can't afford the house that you are trying to buy. You are overextending yourself if you don't have the money. Because if you don't have the money for that down payment, you're not going to have the money for any other of these major expenses that come up or just the normal expenses that increase over time like we've covered in this video. But the reality is too, all these brokerages and realtors and lenders that took part in this should also get in trouble too because they're just as guilty for steering people towards this lender that might not have their client's best intention at heart. And that goes against being a mortgage broker or a real estate agent. That's something that you agree to do when you get your license. You're supposed to have your client's best interest at hand, not yours hoping that you're going to get a $250 gift card because you made the most referrals. How stupid. So my last tip for you in this video is first of all, if you need a real estate agent, somebody that you can definitely trust, make sure you use my link in the description. Guys, I always can get you set up with somebody. It's 100% free. Everybody is vetted and is very experienced and trustworthy. So that's the first thing. But besides that, when you're working with your agent or your mortgage broker or your lender, pay attention to the type of options they give you. Do they try to push you towards a certain lender? They try to push you towards a certain title company? If they do, there might be some ulterior motives there and you need to question that as a home buyer. Personally, when I was selling real estate, I would always recommend mortgage brokers. I would give my client's info to mortgage brokers, but I would never recommend a certain lender because the best thing about mortgage brokers is they have access to a whole host of lenders, just like an insurance agent. You want to get insurance on a property. You want to have access to a lot of different potential insurance companies. You want to have different quotes to be able to make the best decision. So you want to work with somebody that has access to a lot of different options, whether it's for insurance, whether it's for getting a loan, anything. Real estate agents might typically give you a recommendation for a title company, and that's usually just because they know the people at the title company, there's no kickbacks involved there, and they know that the title company is reputable and they're going to get the deal done on time. So there's usually no incentive or ulterior motive in that respect, but you really do need to question where you're being steered when it comes to getting a loan, because there's a lot of different people that can make money off of you in that situation. So if you enjoyed this video, make sure you are subscribed to the channel. And if you don't want to wait for my next video to come out, check out this one on the screen right over here, and I'll see you in the next one.