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Lower Operating Costs Mean New-Home Buyers Can Afford More House

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A newly published study from NAHB’s Economics and Housing Policy Group looks at how operating costs vary depending on the age of the home, using data that has recently become available from the American Housing Survey (funded by the U.S. Department of Housing and Urban Development and conducted by the U.S. Census Bureau).

Basic findings include operating costs (fuels, other utilities, maintenance, property taxes and insurance) that average $6,900 a year, $3.77 per square foot, and 4.24 percent of the home’s value.   However, some of these numbers vary significantly depending on how old the home is.  For example, operating costs as a fraction of value decline regularly as the structure becomes newer, from nearly 5 percent of the home’s value for structures built before 1960 to just under 3 percent for homes built after 2008.


The implication of the difference in operating costs is that buyers can purchase a higher-priced home  and achieve the same annual operating costs if the home is newer.  The article provides an example that takes mortgage payments and income tax savings for a typical buyer of a $200,000 new home into account.  The example shows that, if annual costs during the first year of ownership are the constraint, this buyer can afford to pay $37,655—or 23 percent—more for a new house than for one built before 1960.


The difference is a little more than enough to cover the price of an extra full bathroom.  For more information, including an explanation of the details underlying the calculations, see the complete study, available online.