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.

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.