America’s house-rich, cash-poor crisis: Rising costs are forcing homeowners with plenty of equity to sell

Homebuyers across America rushed to lock in cheap mortgage rates during the pandemic and have profited handsomely thanks to lower payments and soaring property values.

But despite building home equity wealth, many of the very same owners are now facing a bitter reality check.

While their mortgage repayments remain affordable, the costs of other expenses tied to home ownership – insurance, taxes, HOA fees and maintenance costs – are rocketing higher. 

Home equity wealth doesn’t help people who are struggling to keep up with the rising cost of living – and as a result there is an emerging generation of ‘property rich, cash poor’ Americans.

‘The balance sheet says they are wealthy, but the reality is that they struggle to make ends meet on a monthly basis,’ Sander Scott, a realtor and broker at Net Real Estate, told the Daily Mail.

Some are so desperate they are looking to sell, but experts warn that this comes with another set of downsides.

The financial strain has come as a shock to many homeowners who made decisions on what they could afford to buy based on historically low mortgage rates.

Many failed to realize that other expenses beyond their mortgage could escalate dramatically over time.

Experts say it’s a common problem.

John Carter, founder of real estate company NestCash, which buys homes directly from owners for cash, said he has seen a concerning jump in the number of people struggling to make ends meet.

He warned there is a crucial difference between qualifying for a mortgage and being able to afford the total cost of home ownership, with too many Americans falling into the trap of taking on more than they can realistically manage.

‘People buy a home based on what they can afford today, without always realizing that insurance, taxes, HOA fees and maintenance can change dramatically five or ten years down the road,’ he said.

His insights are backed up by other findings. For instance, a 2023 Consumer Affairs report found that 42 percent of Americans did not feel they knew enough about the homebuying process. 

Iraklii ‘Nick’ Panize, president and CEO of Los Angeles-based Westgate Capital Ventures, told the Daily Mail he regularly sees borrowers with substantial equity struggling to keep up with the rising costs of owning their homes.

‘You can own a $1 million property with very little debt and still feel financially stretched every month,’ Panize told us.

‘At some point, having $500K or $1M+ in equity doesn’t help much if your monthly income can’t comfortably cover the carrying costs.’

Panize said the problem is particularly pronounced in California, Florida and Texas, where homeowners are seeing very steep increases in insurance, property tax and HOA costs.

Florida has the highest share of HOA residents in the country, with 43.3 percent of the population living in a community association, according to the Foundation for Community Association Research.

In Miami, HOA fees can exceed a punishing $500 a month for services such as landscaping, trash removal and security.

Florida and Texas also have some of the highest insurance costs in the country, according to MoneyGeek.

In Florida, coverage costs an average of $10,240 a year or about $853 a month – 189 percent more than the national average of $3,548.

Texas homeowners pay an average of $6,854 a year, or $571 a month – 93 percent above the national average.

California is similarly hard hit, with Los Angeles, San Diego and the San Francisco Bay Area particularly vulnerable because owners are sitting on some of the highest property values in the country while facing high overall living costs.

Panize said this is where he sees many borrowers with substantial equity struggling to hold onto their homes.

Rural and mountain towns are also feeling the pain.

Real estate advisor Justin Black told the Daily Mail that Colorado’s mountain resort communities are being hit hard as insurance and property taxes drive up the cost of staying in homes, even for those who have built up significant equity. 

‘Colorado’s mountain resort communities are a textbook case,’ Black told us. ‘Only about a third of the homes here are lived in year-round by locals and roughly 60 percent are second homes or short-term rentals.’

For year-round residents, the rising costs can be especially hard to bear. ‘The main driver: insurance,’ Black said. ‘This is the one catching people off guard.’

In condo and townhome communities, master insurance policies are typically paid through HOA dues, and rising wildfire risk has sent premiums soaring.

Colorado now ranks third in the country for wildfire risk, according to Black, with some HOA insurance premiums jumping as much as 300 percent in a single year.

Owners can also face one-time special assessments that cost several thousand dollars when buildings need work such as new roofs to remain insurable.

Property taxes are adding to the squeeze. Black said residential values in the area have risen by an average of 63 percent since 2021, while tax bills have climbed between 37 and 45 percent, depending on the home. Another increase is expected in 2026.

Black told us that he’s seeing many homeowners forced to sell despite being up-to-date with their mortgage repayments. Many of these people own their homes outright and are sitting on hundreds of thousands of dollars in equity.

The squeeze is particularly hard on retirees, teachers, first responders and working families who live in these communities year-round.

‘It’s a slower, quieter squeeze than 2008, and it’s easy to miss because on paper these people look wealthy,’ Black said.

Those unable to cope with rising costs now face the prospect of selling their house or borrowing against it.

Experts say many are turning to home equity lines of credit, commonly known as home equity lines of credit (HELOCs), which allow owners to borrow against the equity in their property using the house as collateral.

But HELOCs carry variable interest rates. This means monthly payments could suddenly rise and create another expense for homeowners already struggling with their cash flow.

‘You’re essentially adding another payment on top of the mortgage,’ Carter said.

Selling is also a problematic option for homeowners who secured ultra-low mortgage rates during the pandemic.

Offloading their home would allow them to free up any money they have made if their property value has increased. But it also means they would lose their cheap mortgage deal and face paying a much higher rate should they want to purchase another property.

The national average mortgage rate is currently hovering at around 6.6 to 6.7 percent for a 30-year fixed loan – more than 100 percent higher than the 3.11 percent average in 2020.