Report: Home Price Appreciation Drives Increase in Closing Costs for Purchases
March 16, 2021
The national average closing costs for a single-family property were $3,470 excluding taxes in 2020, according to a report from ClosingCorp.
Despite a significant jump in home prices, the average closing costs, excluding taxes, increased only 3.9 percent year-over-year. Average closing costs for a single-family property including taxes were $6,087. This represented a 5.9 percent increase compared to 2019.
Purchase originations topped $1.4 trillion, while the average home price increased by nearly 10 percent. The average U.S. home price increased by roughly $30,000 last year, but the year-over-year difference in the average purchase closing costs was only $339 including taxes and $131 excluding taxes, according to Bob Jennings, chief executive officer of ClosingCorp.
“The U.S. mortgage industry handled this significant increase in volume, and an even larger spike in refinances, seamlessly, and did it working remotely for three quarters of the year,” Jennings said. “Considering the high dollar amount and complexity of the average purchase transaction, our industry continues to demonstrate an impressive level of cost control.”
Jennings attributed much of the cost control to the increased use of technology by both lenders and settlement services providers, which enabled the industry to scale up capacity while holding the line on closing costs.
The 2020 report shows the states with the highest average closing costs, including taxes, were: District of Columbia ($29,329), Delaware ($17,727), New York ($13,261), Maryland ($11,709), and Washington ($11,513). The states with the lowest closing costs, including taxes, were: Missouri ($1,571), Indiana ($2,100), Kentucky ($2,229), Iowa ($2,272), and South Dakota ($2,276).
The states with the highest average closing costs, excluding taxes, were: District of Columbia ($6,250), Hawaii ($5,599), New York ($5,571), California ($5,366), and Illinois ($4,893). The states with the lowest closing costs, excluding taxes, were: Missouri ($1,571), Iowa ($2,020), South Dakota ($2,023), Arkansas ($2,053) and Kentucky ($2,069).
Closing fees for 2.9 million single-family home purchases from Jan. 1 through Dec. 31, 2020 were analyzed. ClosingCorp cost calculations include lender’s title policy, owner’s title policy, appraisal, settlement, recording fees, land surveys and transfer tax. ClosingCorp uses home price data from CoreLogic to estimate closing costs for an average home at the state, core-based statistical area (CBSA) and county levels. ClosingCorp uses ranges, rather than single values, to more accurately capture fees associated with the real transactions.
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