The Boston Commute - how much is convenience worth? A comparison of commute time versus home prices

In this housing recovery cycle, I remain amazed at how much millennials are willing to pay for convenience.   I wonder if they realize the costs and their options.   I have blogged at length about our housing project in Pelham NH, Skyview Estates, and how it fits into the larger greater Boston real estate market.

I was curious to take another look at price vs convenience.  For someone living in or near the city, they may think that Southern NH is a world away.   But that's simply not the case as you can see in this infographic.   For the last 50 years, the typical pattern is for 30 somethings to move out of 

the city, come north of the border to enjoy all the benefits of New Hampshire living, and still excel in their chosen professions.   

Are you willing to drive another 30 minutes to save half a million dollars?   Or 10 minutes to save $300k?

Food for thought.   Comments most welcome.

(This data was collected on Google maps simultaneously at 8am using the same end point in Cambridge, MA and various start points for the commute.  Thus traffic was taken into account.   Home pricing was taken from available listings on Zillow.  Note - there was very little comparable inventory in Massachusetts to even analyze).

Relocating to the Boston area? See why you should check out Southern New Hampshire.

Are you relocating to the Boston area and trying to decide which community to settle in?   You owe it to yourself to check out Southern NH especially if you are working in Boston/Cambridge North (Burlington, Bedford, Andover, Lowell and surrounding communities).

The price of homes in the immediate Boston area has skyrocketed– making affordability a real challenge.    You can buy a home on the Mass border in NH for hundreds of thousands of dollars less than an equivalent home in Massachusetts.   And you get all the advantages of living in NH!        

Check out these blog posts and compare for yourself:

Top 20 Reasons to Live in NH

Can you save half a million dollarsby living in NH?

The rightsizing equation

Buying new construction versus resale.

Are you afraid to buy a house?   How about increasing your retirement yearsby 50%?

If you like the NH story, come check out our development at Skyview.   You’ll be amazed how close we are to Boston and local amenities and yet how stunning our hill top setting is.  

Should you buy new construction or a resale home?

Think back 10 years ago to 2005.   Did you have a smart phone?   The first iphone wasn't released for another two years in June 2007!  

Just as consumer technology has transformed over the past decade, so too has home building technology.   Today’s homes are much more energy efficient due to both stricter ‘green’ building codes and advances in energy efficient insulation, windows and other building materials.   And the major components that make up a home – furnaces, appliances, air conditioners, and are also more efficient and reliable.

Just take a look at this new home at Skyview in New Hampshire?   This picture was taken in February 2015 (what a Winter, right?!)

 after a month of record snows.   Can you spot any icicles on the roof?  No? That’s because these homes are so energy efficient that you don’t have the melting/freezing cycle that occurs in an older home when heat escapes up through the roof and joints.  Compare it to this picture taken on the same day of an older home.

 The housing crisis started in 2006 which means that until just recently, home construction was effectively at a stand still.   So, if you’re looking to buy a home today, chances are most resales will be 10 years old or older just due to the fact that not many homes have been built since the great recession.   While these homes may have been renovated to look new, the ‘bones’ are still a certain age which means more maintenance and a less energy efficient home.   Are you up for the maintenance headaches, expenses and cost of ownership of less efficient home?

If not, you may be thinking about new construction.    Here is an excerpt from www.Forbes.com on the advantages of new construction:

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According to Trulia’s latest survey, twice as many people prefer new homes to existing homes.  “New” means exactly that: brand new properties that have never been lived in before, or homes purchased in the pre-construction phase. On the flip side, “existing” or resale homes are pre-owned properties, most of which were built between the 1920s and the 1970s. For the same price, 2 in 5 Americans – a sizeable 41% of the population – either somewhat or strongly prefer a newly-built home over an existing one.

While shiny and new sounds nice in theory, what’s actually behind the allure of these properties?  Let’s dive into the advantage and disadvantages:

The Pros

·         You’re able to have the builder customize the home before construction is completed, so it will be built with your personal touch and painted in your color palette – a big bonus!

·         With new construction or pre-construction purchases, the work is done for you. You don’t have to lift a finger, a paint brush, or a hammer.

·         New homes come with some of the design elements that today’s lifestyle demands: open, eat-in kitchens, walk-in closets, and large master baths to name a few.

·         A big financial benefit of new properties is that you won’t have to do much maintenance. With brand new appliances, plumbing, heating, and air, you should be repair free for at least a few years.

·         Utilizing new construction materials, just-built homes are usually more energy efficient; that means potentially lower utility bills.

·         New homes and condos are often equipped with the latest technology built right in – think alarm systems, speaker systems, Internet wiring, and cable – saving you lots of time, money, and holes in the walls.

·         You’re moving into a house that should be totally complete and absolutely perfect. That “new house smell” is definitely a luxury!

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There are downsides to new construction.   Some of the biggest concerns cited include:

-       Cookie cutter subdivisions,  Lack of architectural detail and craftsmanship, Postage stamp, small lots, Concern about the builder reputation,  Don’t want to be the ‘first one’ in the subdivision, Lack of custom options

All valid points.   But at Skyview, we like to think we offer the best of new construction.   We have all the advantages of maintenance free, energy efficient, well designed homes.   Plus, we are an established subdivision with beautiful lots, varied home designs with craftsman flair and a long list of satisfied home buyers who will attest to our reputation as builders.   

When making your decision between resale or new construction you owe it to yourself to come by and check out Skyview.   And don't rush into a resale just because it's there.  A new home can be ready in a few months.  Don't settle for anything less than your easy to maintain, efficient dream home.

Are your in-laws or parents thinking about relocating to be near the grandkids?

Do your kids wish their grandparents lived nearby?

Are your in-laws or parents thinking about relocating to be near the grandkids?  

Over the past 10 years, my wife and I have noticed a tendency of parents of our peers to move to NH to be closer to their adult children and grandchildren.

Does this sound like you?    You’re married, with a couple of young kids, living in the Boston area, you and your spouse have successful careers.  Birthdays and holidays often involve a plane ride or a long drive to see extended family.

And does this sound like your in-laws or parents?   Successful in their own right, retired or semi-retired, but definitely not ‘old’, shifting priorities, a desire to be near the grandkids to share their love and wisdom. Maybe on a recent visit the idea came up, ‘How would you guys feel if we moved closer to your family so we could see the grandkids more often?’  You and your spouse thought about it and decided that, actually, it would be great to have family around.  

So what now?

As I looked back over the blogs I’ve been writing this year, there is a storyline that speaks to your situation.   Here are some themes that might help you and your parents (or in laws) figure out the next steps.

1)      Savinghalf a million dollars by moving to New Hampshire.   This blog looks at real estate prices and cost of ownership as a function of distance from downtown Boston.   The bottom line is that Southern NH is a great solution to get the most house for the dollar while still being a convenient distance to Boston.   And, it may provide just enough separation so that you and the grandparents are close but not too close.

2)      Top20 Reasons to live in New Hampshire.   This is pretty self-explanatory but one thing that jumps is the tax structure, particularly for retirees with some consulting income and significant capital gains.  New Hampshire is a no-brainer versus Massachusetts.

3)      Rightsizingyour home.   This blog talks to the advantages and economics of buying a house that fits your current lifestyle.   It can be extremely freeing to finally let go of that huge house and get into something new and more manageable.    And it can also free up equity and cash flow to finally splurge on those trips and experiences your parents have been talking about for so long.

4)      Top 5 reasons an over 55 community may not be right for you.   Your parents may be over 55 but they aren’t ‘old’.   And the last thing they want is to be surrounded by a monoculture in an adult community.   Our subdivision, Skyview Estates in Pelham, NH provides many of the advantages your parents would be looking for – luxurious single story living, smaller lots, gorgeous views, and other community benefits while still being an unrestricted, diverse neighborhood. 

Are you afraid to buy a house?

Recently, for the nth time, I was listening to a housing economist discuss the Millennial generation – again predicting that they will be a generation of renters.   I heard the well-worn litany of arguments: this generation witnessed their parents get burned on their homes during the recession,  Millenials don’t believe that homes are an investment, they have difficulty getting mortgages, they are forming relationships later in life, etc., etc.    I agree that in the immediate aftermath of the housing crisis, these factors were true and valid.   But these issues are temporal and rapidly fading – and certainly not a permanent condition of the Millennials.

My experience is this: young people have recovered confidence, want to own a home, can now get a mortgage and, most importantly, are smart enough to know that buying a house is a no-brainer.   I also believe they have acquired wisdom from observing their parents: they want smaller, greener, lower maintenance homes - a home that works for their lifestyles and priorities.  (see my post on rightsizing your home for a happier life) 

With the proliferation of rent-versus-buy calculators, I was curious to check the numbers for myself.   I took a look at buying a house in our project, Skyview, as compared to renting a similar home in the area.   In my analysis, I took the ‘no investment’ perspective of the young buyer and assumed zero appreciation over 15 years.   At first glance it appears that home ownership is more costly than renting -- by about $4k per year.  (check out the numbers below)   But when you compute the interest tax deduction and the equity from your mortgage principal, you save $22k per year versus renting!    Over 15 years, that’s $332,000.

Now, let's be a little bit optimistic on home appreciation.   Even taking the recent housing crisis into account, long term home price appreciation roughly matches the rate of inflation.   Three percent per year seems to be a generally accepted long term housing appreciation rate.   If you add this appreciation into the analysis, your home value increases from $429,000 to $668,000 in fifteen years.   The overall difference between buying versus renting with 3% appreciation exceeds $572,000!   So Millenials out there, consider this: if you  earn $90,000 a year, that equates to 6.4 years of working. If you value your time and life balance, 6+ years is a lot of time to sacrifice.  Even more striking, according to a recent Gallup Poll, the average retirement age is 62 and the life expectancy of someone born in 1985 is just under 75 years which equates to 13 years of retirement.   By this analysis, if you own a house for 15 years, you could potentially increase your retirement years by almost 50% from 13 to 19+ years.

So don’t be afraid to buy a house – be more afraid not to!      

    

In this analysis, I only looked at a 15 year period and did not take into account the incremental investment income that can be derived from the savings.  As you take these additional variables into account, the argument for home ownership only gets stronger.

I don’t pretend to have a crystal ball for the future.   We could have another housing crisis and homeowners may be under water again.   Or, we may high inflation due to all the government spending since 2008 and owning a house may become all the more important as a hedge.   Nobody knows and each person has to make their own decision and risk calculation.   But I know that Millennials are more intelligent than the current conventional wisdom reflects.

As always, comments and counterpoints welcome.  If you want a copy of this spreadsheet, just send me an email.   Check out Skyview

What's the right size home for you? The Rightsizing Equation

There is a significant trend toward smaller homes amongst both empty nesters and young families.    The generally used term is called downsizing--but I prefer “rightsizing.”   I’ve always been a big proponent of efficiency – sometimes to the chagrin of my wife (why cook in early December when you can make at least 7 different meals using leftover turkey?).    Our family recently moved from a 3500’ McMansion (which would be considered on the small side considering the trend of the last 20 years) to a smaller cape which we renovated  -- and  the space feels larger and better utilized. (For some great examples of this, read about architect Sarah Susanka’s concept of the “not so big house” on her website  www.notsobighouse.com.)

There are a number of hard facts that make rightsizing a compelling argument.  Empty nesters moving to a smaller home can realize the economic benefits of lower mortgage, utility, tax and maintenance expenses while at the same time not feeling enslaved to the care of feeding of a large home.    Just as importantly it improves quality of life.   Not to mention the fact that equity from the sale of the larger home can be deployed to provide incremental investment income.

For younger families, there has been a general shift in sensibilities.   Bigger is not necessarily better.    A well-appointed, efficient home that is green and consumes fewer resources are the priorities.  Just as with the older set, the young families want a home that is a component of their lives but doesn’t rule their lives.  Along with this is the renewed interest in community, common spaces and neighborhoods where people of all ages have opportunities to interact.

In this post, I wanted to explore the hard numbers around the generally accepted notion that rightsizing for empty nesters saves money.   After some consideration I decided that there are really two independent scenarios to look at:  1) the cost reduction model and 2) the investment income model.

In the cost reduction model, I looked at a comparison between the estimated costs of ownership of the 2054 sq foot “Currier” model home at our Skyview project versus a larger, 5500 sq foot home in the same area.  We see this scenario playing out each day as buyers look to move from homes within Skyview’s town of Pelham, from the Boston area, or from other affluent communities in New Hampshire.    I assumed that all other variables were consistent between the two homes and did a rough estimate of utility cost based on square footage.  The net savings by rightsizing is $33,000 per year.  

  

In the second scenario, I assumed that equity in the larger home  could be invested to produce investment income.    In this example, I assumed $400,000 of equity in the home based on the current market value less the current mortgage balance.   For capital gains tax, I assumed a 25% long term capital gains tax rate X the difference between the sales price and original purchase price.  After subtracting  sales commission and down payment for the new Currier home, more than $290,000 is left for investment.   At a 7% annual return, that equates to over $20,000 in annual investment income.   

Every situation is different.   If you’d like a copy of this spreadsheet, just send  me a quick email or connect through our Skyview website.   Regardless of your particular circumstances, rightsizing your home can make a lot sense both economically and in your quality of life.

Can you still save half a million dollars by moving to New Hampshire?

This is an update to a post I published last May.   In the last 9 months, home prices in Boston have continued to rise.   So, I re-ran my original analysis to see if you could still save half a million dollars buying in NH versus MA.  Read on...

The Boston area residential real estate market is hot -- driven in large part by the enormous resurgence in tech and life sciences companies.   This infographic illustrates the variable of commuting distance from

 downtown in determining home price. If you work in Boston or Cambridge, New Hampshire may seem a world away but it's only 34 miles to Kendall Square.  You would be surprised at how many executives who work in Boston, Cambridge, Burlington and Waltham live in southern New Hampshire.

I recently became involved in residential development in southern New Hampshire with our Skyview project. Real estate agents kept telling me about the perception that Massachusetts buyers had about high property taxes in New Hampshire.   That got me looking at property taxes and other factors that contribute to cost of living differences between NH and Mass.   I came up with the following calculator that takes into account housing costs, tax rates, salaries, commute cost and a number of other factors.   The results were pretty compelling - not only were absolute property tax dollars LOWER in NH but the 15 year savings were over half a million dollars.

Now, my assumptions may be a bit off and not all situations are the same.  I'd love to hear feedback.  (If you want a copy of the actual spreadsheet to play with - send me an email.).

Granted there are big differences between living in Cambridge, MA and Pelham, NH.   But the difference between living in Westford and Pelham are far less dramatic.  In fact, many Massachusetts and even New Hampshire residents aren't fully tuned in to the advantages of the New Hampshire living.   See my post on top 20 reasons to live in NH.   Sure, the commute is a bit longer if you are heading south but the traffic between the NH border and 495 is relatively easy as compared to downtown Boston.

So, take a look and let me know your thoughts.   And if you are interested, check out our awesome homes at Skyview - where by the way you can see the Prudential center from the top of the hill!

This post originally appeared on The John Gargasz blog @ blogger.com.

Top 20 Reasons to Live in New Hampshire

I am an avid supporter of the burgeoning startup ecosystem in New Hampshire through 10X Venture Partners, the Granite Fund and Techout NH.  I am also active in the local real estate market and we just launched a new residential subdivision  -  Skyview.  It strikes me that the message of everything NH has to offer doesn't get out enough.   This post talks to the well known and lesser known benefits of New Hampshire living.     

New Hampshire reaches national prominence once every 4 years with the first in the nation presidential primary.   While we may fade from the national consciousness between elections, New Hampshire is a phenomenal place to live with close proximity to Boston, the mountains and the ocean.   The Live Free or Die state has the lowest tax burden in the nation as a percentage of gross income but that's only part of the story.  Here are a number of other great reasons to consider the New Hampshire lifestyle - many of which will likely surprise you:

1	Sales Tax
	New Hampshire has no general sales tax.
	Source: NH Department of Revenue Administration
2	Income Tax
	New Hampshire has no general personal income tax. Dividends and interest are taxed at only 5%.
	Source: Bankrate
3	Capital Gains Tax
	New Hampshire has no capital gains tax.
	Source: Area Development Online
4	Small Business
	New Hampshire is friendly to small businesses and entrepreneurs. New Hampshire is frequently among the top 5 in nationwide rankings of business-friendly states.
5	Median Household Income
	New Hampshire's median household income of $62,647 is among the highest in the country.
	Source: US Census Bureau
6	Low Unemployment
	As of March 2013, NH unemployment is 5.7%; US average is 7.6%.
	Source: US Bureau of Labor Statistics
7	High-Tech Jobs
	New Hampshire is ranked 9th in the nation for percentage of high-tech jobs.
	Source: TechAmerica
8	Retail Benefits
	Retail businesses benefit from proximity to Maine, Vermont, Massachusetts, Connecticut and Canada as residents shop in New Hampshire to benefit from the lack of sales tax.
9	Quality of Life and Livability
	New Hampshire has been ranked #1 in the nation for quality of life and livability 5 years in a row.
	Source: StayWorkPlay.org
10	Safety
	New Hampshire is the safest state in the country.
	Source: CQ Press
11	Health
	New Hampshire is the 3rd healthiest state in the nation.
	Source: America's Health Rankings
12	Health Care Quality
	New Hampshire is ranked 1st for health care quality.
	Source: Federal Agency for Healthcare Research and Quality
13	Highway Safety
	New Hampshire has the 3rd fewest fatalities per 100 million miles driven.
	Source: Reason Foundation
14	Child Well-Being
	New Hampshire is ranked 1st nationally in the index for child well-being.
	Source: The Annie E. Casey Foundation
15	Vehicle Ownership
	New Hampshire is the least expensive state in which to own a vehicle.
	Source: Forbes
16	Schooling Options
	New Hampshire offers many private/non-government schooling options, including home schools, Montessori schools, Waldorf schools, religious schools, boarding schools, and traditional private high schools.
	Source: GreatSchools
17	Standard of Living
	New Hampshire has the highest standard of living in the country (based on poverty rate, 2011)
	Source: PSNH
18	Quality Education
	New Hampshire 4th graders ranked 1st place in a national science assessment test.
	Source: WCAX
19	Outdoor Activities
	New Hampshire offers outdoor activities throughout the year, including biking, bird watching, boating, camping, climbing, fishing, golfing, going to the beach, hiking, horseback riding, hunting, skate boarding, skiing, and snowmobiling.
	Source: NH Outdoors
20	Hiker's Dream
	NH is a great place for hikers, boasting 48 mountains with peaks higher than 4,000 feet, access to the Appalachian Trail, and numerous trails of various distances and difficulties throughout the state.
	Source: NH Outdoors

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