Offsetting Home Ownership Costs

by Michele Weaver | Sep 21, 2020 | HER Home

Since 1980, the number of Americans living in multi-generational households has been on the rise to where today, one in five U.S. households have at least two adult generations in the home, and usually children, too. Younger adults find paying rent to their parents and moving back home frees up some cash for repaying student loans, while newlyweds move in because the lower rent allows them to save faster for a future down payment. Changing economic times such as the Great Recession that began in 2008 and the job losses resulting from the 2020 pandemic caused many families to choose to pool their financial resources. Multiple generations under one roof is commonplace among some cultural backgrounds. And there’s the familiar scenario of moving aging parents in rather than the assisted living alternative.

Homes designed with multi-generational living in mind are in demand! A main floor bedroom suite is almost always a prerequisite, avoiding stairs for the elderly household members such as in the Wilks Manor (#9165 – below) with its Guest Suite behind the garage.

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But increasingly popular are designs with two bedroom suites having comparable accommodations. Often, both suites are on the main floor, though designs such as the Dillon Park (#42477 – below) provide more separation and privacy, with suites on different levels of the home.

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Relatives splitting housing costs does not always involve differing generations. The suddenly single widow, other siblings, or even cousins are moving in or purchasing homes together, out of economic necessity. As with moving aging parents in, it is best to have a clear understanding of the shared financial responsibilities. Are necessary maintenance and repair expenses shared equally, or the responsibility of only one party?

Some homeowners expect to rent out part of their home from day one. One builder who purchased the Cedar Pointe (#42389) told us his primary market is younger, single, professional women. He went on to explain that affordable homes with two suites provide the rental income opportunity his market wants. Several reports have been published recently that Millennials are renting out bedrooms and even parking stalls in their garages.

At less than 1400 sq. ft. and with a second bedroom suite up front, the Cedar Pointe is a natural layout for young single home buyers looking for rental income to reduce their housing costs.

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Tax deductions. If you itemize deductions on your income taxes, you may be able to deduct mortgage interest paid. And if you work from home, you may be able to deduct other expenses as well. According to the IRS website, “If you use part of your home exclusively and regularly for conducting business, you may be able to deduct expenses such as mortgage interest, insurance, utilities, repairs, and depreciation for that area. You need to figure out the percentage of your home devoted to your business activities, utilities, repairs, and depreciation.”

You work from home and frequently have clients, colleagues, and other business associates stop by your house. Built from the Leinart (#29336 – below), you can use the entire right side of your home (423 sq. ft) exclusively and regularly for business. A convenient shipping zone just off the front porch, with its private yet secure parcel drop, is ideal if you frequently ship or receive packages. So, slightly less than ¼ of your home’s finished square feet devoted to business activities and may be deductible. Consult your local tax professional to discuss your home office tax deductibility.

The Leinart’s home office wing to the right side plus its shipping zone account for 22.9% of the home’s square footage, providing a significant tax deduction when those spaces are used for working from home.

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Sharing housing related expenses. Renting out a part of your home. Tax deductions. You may be able to offset a significant portion of the cost of owning your home, especially if it was designed for how you want your home to live!

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Cost of Ownership – Resale Value

by Michele Weaver | Sep 14, 2020 | HER Home

When looking at your new home investment, one of the considerations is future resale value. Buyer preferences change over time, and the farther out your time horizon, the less confident you can be in a design, amenity, or product’s future popularity.

Americans live in their homes an average of 13 years, according to a study cited in a January 2020 article from the National Association of Realtors. So, here are three plans: a hot new design and two similar size plans that were new and popular years ago:

More than 25 years ago, the Orchard (#2818) was a top-selling home plan. The bedroom suite bathroom’s twin boxed-out windows and whirlpool tub have fallen out of favor with most buyers. Twenty-four-inch wide bathroom doors, a 4-foot shower and 6-foot walk-in closet don’t excite most of today’s buyers. The peninsula kitchen is fairly closed off; open to the entry is a formal dining room; and you enter through the laundry room coming in from the garage—all issues which may depress the home’s resale.

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Though it’s had several birthdays, the Leftwich (#29300) plan is still quite popular today and illustrates some evolving buyer preferences. It is an open floor plan with an island kitchen that flows freely into the eating area and family room. Compared to the Orchard, the Leftwich’s bedrooms are slightly larger and the closets are significantly larger. Plus, there is a rear foyer entry from the garage with separate laundry room.

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The Teglia Farm (#42482) is a brand-new plan that is already getting a lot of attention. Embracing the shift to value engineering, this design’s foundation has minimal jogs to keep costs down. In its kitchen, the island has back-to-back base cabinets for added storage, and the expected walk-in pantry. Without the limitation of walls, the dining area can temporarily expand into the family room for big holiday meals. There is a 5-foot shower in the bedroom suite and its walk-in closet enjoys a convenient connection with the laundry room. Flexibility is illustrated by the buyer’s choice – walk-in closets for Bedrooms 2 and 3; and, something neither the Orchard nor Leftwich have – a powder bath.

(Click on the images to view larger.)

Market Shifts, Trends, and Fads. Shifts in buyer expectations are the most pronounced and universal – having significant impact on a home’s appeal and resale value. There has been a shift away from formal dining rooms as we have become generally more causal, preferring usable space in our homes. Value-engineering is expected. What was an established trend, fueled by the 2020 pandemic, accommodations for working from home have likely become a shift for buyers.

Trends are obvious departures from the past and tend to address an existing problem or issue but are not as widespread as shifts. Seventy-eight percent of American adults don’t bathe (they shower instead) and among those who do like to take a tub bath, most use the tub only occasionally. A decade ago, some Realtors were telling us that no tub in the owner’s bathroom would hurt resale. Today, most buyers shy away from a home without a larger shower in that bathroom and feel a tub is waste of space…they don’t want to have to dust the tub!

The 25-year old Orchard still has good curb appeal, but the combination of obsolescence and lack of current, in-demand amenities hurts its resale value. It likely also has dated finishes and products. The Leftwich design speaks more directly to today’s buyers, but still its kitchen pantry cabinet and “snout” garage don’t work for some buyers. The Teglia Farm embodies many of today’s buyers’ preferences. So, 13 years from now, which of those designs would you want to be reselling?

Beyond design, resale should be a factor when making other choices. You choose to add the builder’s “first impressions” option package, with the beautiful front entry door, tapered porch columns, and attractive garage door. Not only will you appreciate your home’s curb appeal every time you arrive home, so will prospective future buyers. In fact, a study by Therma-Tru found stylish entry doors could increase a home’s perceived value by an average of 4.2% or $18,750. What about some extra-cost options that aren’t so easily appreciated? You opt for the builder’s “energy investment option.” Behind the walls, that high-performance insulation is a hidden asset. But you can show your lower utility bills, effectively bolstering your home’s resale value. Know that when a home’s price is higher than expected, buyers will look for the reasons why it is worth more. Contrast that with a home that has a lower-than-expected price. People looking at that home focus on the negatives – what makes it cheaper.

Next time…Offsetting Home Ownership Costs

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Cost of Ownership – Replacement and Maintenance Costs

by Michele Weaver | Sep 7, 2020 | HER Home

Last time we looked at PITIU (Principle, Interest, Taxes, Insurance, and Utilities) as a truer definition of total monthly housing costs. But if you’re also considering a resale home, there are other costs that need to be figured in.

Replacements. How would we expect the resale and new homes to compare, replacement cost-wise, over the next 10 years? A May 24, 2019, article in U.S. News & World Report identified the life expectancy of several key products in the home. We’ve added average quality product pricing to come up with the following:

Replacement product costs for the resale home come in at $22,500 higher, which equates to $187.50 per month on average more. Now, not every one of those items may need to be replaced on the resale home within the next 10 years, but the likelihood of needed replacement is much higher for the older home.

Maintenance costs are likely to be higher for the resale home. From repainting a few rooms to having the carpets and air ducts cleaned, there may be costs you incur soon after moving in. More expensive projects will probably occur much sooner as well, such as exterior painting or cleaning/sealing/staining the deck. Maintenance ignored will hasten even more expensive repairs, such as redoing concrete driveways and sidewalks or rebuilding a wood deck. Of course, you can save some of the cost by doing these things yourself – if you have the expertise, tools, and time.

Sherwin-Williams’ Harmony® paint contributes to cleaner indoor air quality by reducing VOC levels from potential sources like carpet, cabinets and fabrics. Harmony paint also works to help rooms stay fresher, longer, with odor eliminating technology that breaks down unwanted household odors. Photo courtesy: Sherwin-Williams

Your style. Then there’s the combination of your tastes coupled with the obsolescence inherent with a resale home. The previous owners may have loved those trendy light fixtures. You think they’re gaudy. Same goes for the bathroom mirrors. That big, deep, built-in entertainment center may have been perfect 20 years ago. Now it’s wasted space. The interior was repainted just before putting the home on the market – but mauve just isn’t your color. Yes, you can put up with these shortcomings for a while but compared to selecting what you want and having everything brand new, there are very real costs to settling for someone else’s choices. Plus, while something like changing out bathroom mirrors may be a project you can tackle, other projects may necessitate hiring professionals. You want to open the kitchen to the eating area and family room, but is that a load-bearing wall? Worse yet, it may be pretty much impossible to accomplish some tasks. So much for the 8-foot high basement ceiling you wanted.

Most of us need to be budget-wise when considering buying a home. When looking at the monthly housing budget, we start with PITIU. But if you are considering new construction and resale homes, product replacements, maintenance and repairs, and updates that correspond with your preferences, have to be included when calculating the monthly housing budget for pre-owned homes.

Next time we look at resale considerations when building new.

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Bathroom Photo: Courtesy of Artistic Tile
Ceiling Fan and Bedroom Photos by Renee D. Calvin Photography.

Cover photo: <a href=’https://www.freepik.com/photos/people’>People photo created by freepik – www.freepik.com</a>

Beyond Dollars – The Cost of Home Ownership

by Michele Weaver | Sep 4, 2020 | HER Home

Thinking about the cost of home ownership often resides in the “left brain,” which is associated with information, rational thinking, and analytics. Yet we feel other, very real costs, expressed in terms such as happiness/frustration, contentment/disappointment, or confidence/anxiety. Closely related to cost, William Poundstone points out in his book Priceless, “Though a price is just a number, it can evoke a complex set of emotions.”

The cost of home ownership is more than what we pay in mortgage payments, utilities, maintenance, and repairs. What is the value of living in your dream home? A kitchen in which you can create masterpieces, enough storage that you can feel organized, and outdoor living space that’s fun for everyone?

Yes, we look at costs in terms of dollars. In lieu of the standard shower in the bedroom suite bathroom, the spa shower costs $3,000 more, about $16 higher per month in a 30-year mortgage at 5% APR. But your right-brain (feelings, emotions, story) reminds you that every day you’ll use that shower. It might be that you enjoy taking a hot, relaxing shower. It might be that you want to use the body sprays for an invigorating shower. It might be that you just don’t want to bump your elbows into the sides of the standard-size shower when washing your hair. How would that spa shower make you feel physically? How would it make you feel about yourself? Then there is its impact on resale – a future buyer may fall in love with that spa shower, the amenity that gets you a quicker sale at your full asking price.

The spa shower you want might be what clinches your home’s future resale!

Whether we were forced into it or leapt at the opportunity, many of us got to experience firsthand the “joy” of working from home during the 2020 pandemic. Suddenly, we had a new appreciation for home office design. Size, location, privacy, natural light, storage, workspace, seating… even the trek to the bathroom all took on new meaning. Companies discovered some underappreciated benefits of having employees work remotely, too. Now, whether full-time or a couple days per week, millions more of us have jobs working from home. But at what “cost”? For our happiness…our sanity…our productivity, this may mean remodeling or even buying a new home, designed with the amenities and solutions for working from home we need and want. There are a few silver linings, such as the potential home office tax deduction, reduced commuting time and expenses, even “going to work” in your comfortable yoga pants. How do those things factor into the cost of home ownership?

Many of those same issues can be applied to home schooling. At the time this is being written, the jury is out on whether schools will return to their pre-pandemic “normal.” Some have already announced a remote or a hybrid approach, going to 2 or 3 classroom days per week, and issuing laptops or tablets to students for learning/studying at home.

Flex spaces perfect for working from home/schooling from home became the new must-have amenity with the pandemic. This flex room with a wall bed is perfect for guest space and/or working/schooling from home. (Photo: Closet Factory)

If you have the time, the know-how, and the tools, you may be able to tackle costly maintenance and repair projects inherent in older homes. What is your time worth? If you lack the know-how, what’s the cost, in terms of time and frustration and money, of doing that repair twice? New homes give you back time, like not dusting the whirlpool tub you never use. Staying put, doing nothing seems safer, because we don’t often consider the high costs associated with inaction.

On May 15, 2020, Seth Godin’s blog read, “The cost of something is largely irrelevant, people are paying attention to its value.” Once we learn to value how a new home can enrich the lives of everyone in our household, positively affect our health and our outlook, even grant our desire for enhanced livability and style, we can take a holistic look at the total cost of home ownership.

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Thoughtful Design Concepts

Wall Bed/Flex Room Photo: Closet Factory

Cover Photo: <a href=’https://www.freepik.com/photos/coffee’>Coffee photo created by user18526052 – www.freepik.com</a>

Cost of Ownership – Total Monthly Housing Costs

by Michele Weaver | Aug 31, 2020 | HER Home

Principal + Interest + Taxes + Insurance (PITI) – that’s been the standard way of defining monthly housing cost and often been a factor in determining how large of a monthly mortgage payment you can afford. Today’s historically low mortgage interest rates in many areas have made purchasing a new entry-level home on par with renting:

(Click on image to enlarge.)

Of course, a higher initial down payment reduces the Principal + Interest portion, and if you are fortunate enough to have 20% of the purchase price available for a down payment, you can finance the home through a conventional mortgage, at an even better interest rate, and with no mortgage insurance premium. You can’t do much about your Taxes (sigh). But your choices can certainly impact your homeowner’s Insurance costs. New construction homes are often rated differently and are less expensive to insure because they are less likely to have issues and claims.

Likewise, because the roof is new, it is usually rated more favorably reducing your premium. Impact-resistant roofing products can further reduce insurance costs in hailstorm-prone markets. If it adds $6 per month to your mortgage payment to upgrade to impact resistant shingles, but having those shingles saves you $200 per year on your insurance, that’s a win! Fire and security alarm systems can save you money on insurance premiums, with deeper discounts if they are monitored by a third-party.

Photo: Atlas Roofing – Class 4 Impact Rated StormMaster® Shake Style Shingles

Still PITI is incomplete without “U” – Utilities should be factored in to provide a truer picture of your total monthly housing costs. It may be possible that spending extra money up front on energy-efficient construction nets you lower monthly housing costs. Assuming 5% mortgage interest rates, spending $8,000 more for energy efficient upgrades adds about $55 to the monthly mortgage payment. If those energy saving measures are projected to save that much or more on your utility bills, spending a little more now for energy efficiency can be one of your best investments. And with energy costs likely to rise in the future, that investment performance will only get better!

Built to the current energy code in effect for your location, most new homes today are more energy efficient than resale homes. Still, the energy code is the minimum; high-performance building products and systems can dramatically cut your energy usage. While there is no single “best way” to achieve an energy-efficient home, many approaches deliver outstanding results and may provide other benefits as well.

Building systems. Insulated Concrete Forms (ICF) are commonly made of two “skins” of insulating foam, stacked in place, and filled with concrete and reinforced steel. The resulting 9- to 11-inch thick exterior walls deliver superb energy performance as well as creating an extremely strong home, which is better able to withstand natural disasters. Design Basics offers more than 125 home plans for ICF construction. Structural Insulated Panels (SIP) are typically made from two “skins” of OSB or plywood that sandwich a thick slab of insulating foam. SIPs can be used for roofs as well as exterior walls to create highly energy-efficient homes, which are also stronger and safer than most traditionally built homes. Design Basics currently offers 50 plans for SIP building. Please note that Design Basics can adapt any of our home designs for ICF or SIP construction.

While the elevation remains the same, the exterior walls on the floor plan (below) appear thicker on an ICF plan. Varying from 9 – 11-inches thick, ICF exterior walls are 5 to 7 inches thicker than the 2 x 4-inch exterior walls of the typical home.

Cotter – Plan #42031

Example ICF construction.

High-performance insulation. It costs a lot to keep your home cool in the summer, so the goal is to keep as much of that conditioned air inside your home as possible. High-performance insulation seeks to 1) eliminate air leaks, and 2) slow the transfer of outdoor temperatures through your walls. There are numerous approaches and products available to accomplish this, at different price points. Talk with your builder, as she or he may have a preferred solution. Similarly, better energy-rated windows and doors may be part of your solution.

HVAC systems. You may pay a lot of attention to the efficiency rating of traditional furnaces and air conditioner SEER ratings; or, a heat pump may be a more efficient choice. Yet often overlooked is the fact that a surprisingly high amount of conditioned air can leak out of your home’s ductwork, so ask your builder or HVAC contractor about the steps taken to seal the ductwork. Also, if your home will be built with one of the building systems or high-performance insulation, the heating and cooling equipment needs to be sized appropriately. A rule of thumb such as, “one ton of air conditioning for every 500 square feet,” may work in determining the size of air conditioner for other new homes in your area, but may be too much for a tight, energy efficient home, causing your system to cycle on and off quickly and inefficiently. Even the ductwork should be sized differently for a high-performance home. An alternative, geothermal heating and cooling is very energy efficient, taking advantage of the earth’s relatively constant ground temperature below the frost line to keep your home comfortable.

PITIU. It is rooted in a number, but it means so much more! You can’t measure the worth of added protection for your family and cherished belongings provided by alarm systems, or the environmental impact of roof shingles that don’t end up in a landfill after hail. And that energy-efficient home? Your home’s lower energy use will keep tons of greenhouse gas emissions out of our atmosphere every year.

Looking at total monthly housing costs and investing a little more up front can give you improved cash flow, a better home, and bragging rights!

Next time: Replacement and Maintenance Costs

For more resources on thoughtful design and products:

View other articles on our blog
Browse our Her Home™ Magazine
Thoughtful Design Concepts

Atlas Roofing Photo Courtesy: An Independent publisher, not an Employee or Agent of Atlas Roofing Corporation.
Cover photo: <a href=’https://www.freepik.com/photos/business’>Business photo created by freepik – www.freepik.com</a>

Offsetting Home Ownership Costs

Cost of Ownership – Resale Value

Cost of Ownership – Replacement and Maintenance Costs

Beyond Dollars – The Cost of Home Ownership

Cost of Ownership – Total Monthly Housing Costs

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