Monday December 17, 2012
According to a new report by HousingEconomics.com, the average operating cost of a new home is less than an older home. The annual operation costs associated with owning a home include utilities, maintenance, property taxes, and insurance. Recent studies using data from the 2011 the American Housing Survey (AHS), sponsored by HUD and conducted by the Census Bureau investigate these operating expenses and looks at how these costs vary depending on the age of the structure. Findings include the following:
— The largest components of operating costs are fuels and property taxes, at a little under $2,500 each.
— Maintenance costs average $547 a year but decline as the structure becomes newer—from $564 a year for homes built before 1960 to only $241 for homes built after 2008.
— Operating costs per square foot decline regularly as the structure becomes newer, from $4.26 per square foot for homes built before 1960 to $2.92 for homes built after 2008.
— Operating costs as a fraction of value also 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 difference in operating costs imply that buyers can purchase a higher-priced home and achieve the same annual operating costs if the home is newer. The report 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.
Operating Costs in the AHS
As noted above, the cost data for this article come from the AHS, which is conducted in odd-numbered years by the Census Bureau for HUD. In the years when it’s conducted, the AHS collects extensive data on each home in the survey, including considerable detail on different categories of housing costs. This article is based on data from the most recent (2011) AHS, which was released to the public in October of 2012.
The 2012 AHS data show that, across all owner-occupied single-family detached homes, total operating costs average a little over $6,900 per year. This includes property taxes, insurance and utilities, but not mortgage payments. Defined this way, the largest components of operating costs are property taxes and fuel expenses, accounting for just under $2,500 each, followed by property insurance ($820), other utilities ($604) and maintenance.
In newer homes, lower cost per dollar of value for fuels is relatively easy to explain as the result of factors like more efficient appliances and HVAC equipment in the homes, and increased insulation due to both buyer preferences and changes in building codes. Lower cost per dollar of value for maintenance in newer homes is also intuitively plausible.