Homeowners who may have a higher mortgage due to purchasing a new home still pay the same first-year costs of ownership as a homeowner of an older home, according to a National Association of Home Builders’ analysis. Overall, homebuyers can afford to pay up to a 36% premium for a new single-family home compared to an older home built before 1960. This is thanks to the operating and maintenance costs. NAHB released an analysis of operating and maintenance costs for new-home buyers earlier this week, but this updated analysis dives even deeper. According to NAHB, a home built before 1960 may have annual operating costs of $17,706 while a new-home requires $12,255 for operational costs.
The starting point in this analysis is the new homes sale price. It is set at $383,900, which is the average sale price of new homes sold in 2019, according to the Census Bureau. Using the current standard 30-year mortgage assumptions, new home buyers’ annual mortgage payments are then estimated at $18,572. New home buyers are also expected to spend 3.2% of the home’s value (or $12,255) on operating and maintaining their homes. As a result, their total first-year homeownership costs add up to $30,826.1
The calculations are then repeated for each vintage category under the constraint that all home buyers have identical annual homeownership costs of $30,826. Because the annual operating costs per dollar value are higher for older homes, buyers of older homes are restricted to making smaller mortgage payments.
Advertisement
Related Stories
Economics
The US Housing Market Faces Uncertainty, But There Are Signs of Recovery Ahead
There’s improvement, just don’t expect the housing market to return to pre-pandemic norms
Demographics
Despite Having Nondiscriminatory Housing Laws, LGBTQ+ Community Still Can’t Afford Homes in These Areas
In cities where LGBTQ+ people make up the largest share of the adult population, less than 10% of homes are affordable
Market Data + Trends
1.5M Housing Units Need to Be Added to Balance US Housing Market
The housing market will likely see challenges persist if inventory isn’t added to accommodate growing demand