Lower Operating Costs Mean New-Home Buyers Can Afford More House
A newly published study from NAHB Economics may help builders make the case to prospective buyers about why newly built homes are a better deal than older, existing ones. Using data from the 2011 American Housing Survey, the study first looked at how operating costs vary depending on the age of the home. It found that the average annual operating cost of a home is just over $6,900, with narrowly defined maintenance costs averaging $547 annually and fuels and property taxes – the largest operating cost components – averaging just under $2,500 each.
However, the newer the home, the lower its per-square-foot operating costs. For example, homes built before 1960 have a $4.26 per-square-foot annual operating cost, versus just $2.92 per square foot for homes built after 2008. Moreover, operating costs as a fraction of the home’s value also decline regularly as the structure becomes newer, going from nearly 5% of the home’s value for structures built prior to 1960 to just under 3% for homes built after 2008. The study then provides an example showing that, if first-year cost is the constraint, a buyer can afford to pay a 23% premium for a new house (compared to one built prior to 1960), simply because it’s new. And based on results of NAHB’s House Price Estimator, that’s enough to put an additional full bathroom in a new home, with a couple thousand dollars left over.
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- Tags: ADI News
- Joanne Loftus