Insurance and Taxes Now Cost More Than Mortgages for Many Homeowners

These ballooning expenses are rewriting the math of homeownership. In September, 32% of the average single-family mortgage payment went to property taxes and home insurance, the highest rate ever for data going back to 2014, according to Intercontinental Exchange.

The analysis is based on borrowers who use escrow accounts to pay their taxes and insurance as part of their monthly mortgage payments.

For a small but increasing share of households, the burden is far more significant. In five major metro areas—Rochester and Syracuse, N.Y.; Omaha, Neb.; New Orleans and Miami—at least a quarter of borrowers spend more than half their monthly mortgage payment on taxes and insurance, according to ICE.

These metro areas have high property taxes or pricey home insurance relative to typical home costs, or both.

Nationwide, taxes and insurance make up more than half of the monthly mortgage payment for 9% of single-family mortgages. That is up from less than 4% at the end of 2014.

Rising taxes and insurance premiums intensify the lack of affordability home buyers already face because of record-high home prices and elevated mortgage rates. Those deterrents have led many home shoppers to give up this year, putting sales of existing homes on pace for their worst year since 1995.

But while mortgage rates fluctuate, climbing property taxes and insurance costs show no sign of reversing.

These costs also pose a growing and often unexpected burden for homeowners, even those who purchased or refinanced when mortgage rates were near historic lows.

Those most at risk are older homeowners on fixed incomes, said Joshua Stewart, director of federal policy and advocacy for Fahe, a network of more than 50 nonprofit housing organizations across six states.

“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,” Stewart said. “That really eats into their housing burden.”

Some homeowners are questioning their purchases after feeling the pinch of higher costs. When Lisa and Michael Landry bought their New Orleans home in 2015, their property taxes, home insurance and flood insurance cost about $725 a month.

Now they pay $2,448 a month for property taxes and wind and hail insurance. That exceeds the monthly payment for principal and interest on their mortgage, which has a fixed 3.5% rate. They pay another $2,000 a year for flood insurance and home insurance for other perils.

They can afford the rising costs as long as he is working, but they will likely need to move once Michael Landry, who is 70, retires.

“Had I known what I know today, we would not have moved here,” he said.

An increase in home-insurance premiums makes it more likely that a borrower will fall behind on mortgage payments, according to a recent working paper by researchers at New York University, Rice University and the Federal Reserve Bank of Dallas.

The jump in home-insurance premiums between mid-2022 and mid-2023 led to an additional 149,000 mortgages becoming delinquent than would otherwise have happened, said Stephanie Johnson, an assistant professor of finance at Rice and one of the paper’s authors.

Janet Raggi, who is retired, said she is selling her home in Bradenton, Fla., because her property tax, home insurance and homeowners’ association costs have all risen since she moved in four years ago.

But the three-bedroom house has sat on the market for more than a year. Raggi said the high mortgage rates and recent hurricanes in Florida have deterred buyers.

Raggi wants to move back to Nevada for a lower cost of living. “We got a great house for a great price with great interest rates, and now that’s all turned on its head,” she said. “I’m looking to get out.”

Homeowners with mortgages are typically required to purchase home insurance, but some without mortgages are opting to go without, especially in places where costs have risen sharply. While that could save them money, it could also make it prohibitively expensive to rebuild if their homes are damaged by natural disasters.

About 6.8% of homeowners reported going without home insurance in 2023, down from 7.4% in 2021, according to an analysis of Census Bureau data by Sharon Cornelissen, director of housing at the Consumer Federation of America.

But the proportion of uninsured owners rose in some major metro areas, especially in Miami, where 21.2% of homeowners went without home insurance in 2023, up from 14.5% in 2021.

Home prices currently hover around all-time highs, but rising property tax and insurance premiums could eventually translate to lower prices in some areas, said Andy Walden, Intercontinental Exchange’s vice president of research and analysis.

“It creates an environment where you have less of your budget” to spend on the mortgage itself, he said. “That drives down the price that people are willing to pay.”

Homeowners who bought in the past two years at higher mortgage rates might already be stretched thin in terms of what they can afford, Walden said. Those borrowers likely plan to refinance if rates go down, but they might not be able to qualify for a new loan if their tax or insurance costs have risen significantly, he said.

Christopher Moynihan got a pay raise last year when he moved with his family from Utah to Nebraska to take a new job. Nearly the entire increase has been eaten up by higher expenses, he said.

Their current mortgage rate is more than double the rate they had on their prior home, and property taxes and home insurance account for 34% of their new mortgage payment.

“It was kind of a bitter pill to swallow,” he said.

Write to Nicole Friedman at nicole.friedman@wsj.com