The dream of owning a new home is becoming less affordable for most Americans. Although the price on a new home gets most buyers’ attention, there are several undisclosed expenses that sit in the background, incrementally pushing the total cost even higher. From taxes on necessary building products to recurring charges and upkeep, these lesser-known forces are significant contributors to the escalating price of new homes. Knowing what these hidden expenses are forces future homeowners to plan correctly and avoid surprises later.
Here are nine major hidden expenses that are driving the rise of new home prices in the United States.
1. Tariffs on Building Materials
Tariffs on overseas materials such as lumber, steel, and aluminum keep elevating the price of construction in 2025. The imposed 25% tariffs on steel and aluminum imports eliminated previous exemptions for key partners like Canada and Mexico. On June 4th, the tariff on these materials was doubled to 50%.
The 25% tariff alone affected around 7% of materials used in residential buildings and then added to their expense by $7,500 to $10,000 for building a typical single-family home. The 50% tariff will now add even more expenses. Supply chain disruptions and increased domestic product demand also push prices higher. Builders pass these added costs on to buyers, contributing to pushing the price of new homes nationwide 3.5% higher this year.
2. Labor and Material Cost Uncertainty
The construction industry is facing a severe labor shortage this year. They need to hire approximately 439,000 new workers to meet the current demand. Though that’s significantly better than the previous years, the shortage remains a significant drain driven by retirements, a lean skilled labor pipeline, and competing industries.
Combined with volatile material costs, builders add cost buffers to protect profits. Builders are driven to put cost buffers on home prices by these uncertainties and to contribute to the record-high building costs that now account for 64.4% of the average price of new homes
3. Property Taxes
Property taxes are another large, often over-looked cost to homebuyers. In some high-tax areas, homeowners can expect to pay up to $10,000 annually. However, the national average is closer to $4,000 – $6,000. Property taxes have been rising steadily, placing a huge amount of money into the cost of homeownership.
Property tax rates vary widely by state and place, but they can add thousands of dollars a year to a homeowner’s bottom line, often increasing with property value. It’s not a one-time cost and one that might suddenly spike, not counting toward affordability in the down payment on the house
4. Home Insurance
Premiums for home insurance have increased significantly in recent years, mainly due to an increase in claims from natural disasters. These raised premiums can be seen primarily in high-risk areas like California and Florida.
Insurance rates are extremely volatile on a regional level, but can run in the tens of thousands of dollars annually to maintain. This is an essential protection against damage to the property, theft, and claims of liability, but it’s a recurrent and sometimes volatile expense that imposes an unseen burden in addition to the mortgage payment, which influences homeowners’ budgets over time.
5. Maintenance and Repairs
Maintenance and repair costs are frequently underestimated by homebuyers. Experts suggest budgeting for about 1-3% of your home’s value for routine upkeep, which can cost thousands of dollars annually.
Even if newer houses require fewer repairs as everything is good as new, they also have their own ongoing maintenance in the way of landscaping, pest control, and HVAC. Neglecting these not only guarantees to lower the value of your home but also has a tendency to create expensive repairs down the road, so you need to budget for maintenance.
6. Utility Costs
Energy expenses are easily a large part of your month-to-month bill. Although costs are different depending on where you live, homes located in low temperatures usually have higher heating costs, while homes in high-temperature areas have higher air-conditioning costs.
Utility bills have increased all over the country due to the hike in energy prices and inflation. But home buyers usually don’t plan for the costs of these ongoing utility bills, despite it being part of the overall affordability of the new house. Thus, if you have the option, it is safer to purchase energy-efficient appliances when buying a home in order to lower utility costs.
7. Homeowners Association (HOA) Fees
Many new homes, especially in planned communities, condominiums, or townhome developments, come with mandatory HOA dues. The fees cover maintenance of community facilities, grounds, security, buildings, and sometimes utilities or insurance on shared structures.
HOA usually charges from $100 to over $1,000 monthly, depending on the neighborhood. While they support community amenities and home value, fees are an extra, continuous cost that is often overlooked by homebuyers when budgeting. Rising HOA charges are among the factors contributing to the general escalation of the cost of homeownership and can impact affordability.
8. Closing Costs and Fees
Closing costs include many of the following expenses: loan origination, appraisal, title insurance, escrow service, and transfer taxes. Total closing costs typically range from about 2% to 5% of the total price of the home.
Most buyers of homes tend to work hard towards saving the down payment, many times underestimating such other upfront fees. Since closing costs are to be disbursed at the actual time of buying, they may cause great pressure on the buyer, particularly first-time buyers or those with low savings, and thus, proper budgeting needs to be conducted for such costs.
9. Limited Inventory
The U.S. housing market has a chronic shortage of affordable homes, which creates a demand that drives prices higher. Although inventory has risen nearly 20% in recent periods, it remains far below pre-pandemic levels and is especially insufficient in price ranges affordable to middle-income buyers.
The deficit is worst for houses costing less than $255,000, which is where demand is strongest. Zoning laws that restrict developers, supply chain challenges, and homeowners who are locked into low mortgage rates all constrain supply, enabling sellers to charge top dollar, and affordability remains elusive to most Americans.
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