The National Association of Home Builders is convincing buyers that they can afford a higher-priced new home by utilizing data from the U.S. Census Bureau and the Department of Housing and Urban Development.
NAHB discovered that those looking to buy can actually purchase a more expensive newer home while achieving the same annual operating costs as an older, existing home.
"Homebuyers need to look beyond the initial sales price when considering whether to buy new construction or an existing home," said NAHB Chairman Rick Judson.
A study by NAHB first researched how utility, maintenance, property tax and insurance costs vary depending on how old the home is. The study found that a home built before 1960 would average $564 a year in maintenance costs, while homes built post-2008 average $241.
Additionally, operating costs average nearly 5% of the home’s value for older homes made before 1960, while the costs average less than 3% when the home was built after 2008.
"They will find that with the higher costs of operating an older home, they can often afford to spend more to buy a new home and still have annual operating costs that fit their budget," noted Judson.
Also studied by NAHB were the first year after tax costs of owning a home — purchase price, mortgage payments, annual operating costs and income tax savings — which revealed that a buyer can afford to pay 23% more for a new home than a property build before 1960 and still maintain the same amount of first-year annual costs.
This reflects a prior prediction by LPS that home prices could jump as much as 35% without affecting affordability.
Although mortgage payments will be greater with a higher-priced home, the lower operating costs means the homeowner will pay the same annual costs they’d pay with a lesser-priced, older home with a smaller mortgage payment, but higher operating expenses.
NAHB notes that new home benefits include open space floorplans, creative storage options and entertainment resources that cater to more modern lifestyles.
"For a family working with a fixed annual budget, new-construction homes offer outstanding comfort, convenience and overall cost savings," said Judson. "Put that together with today’s near-record low interest rates and competitive prices, and the time has never been better to buy a new home."