Last summer my husband and I started going to open houses. Even though we hadn’t reached our house down payment goal yet, we wanted to start going to open houses to desensitize ourselves to the house hunting process. I want to become accustomed to house shopping so that when the time comes, I don’t get swept off my feet and tempted to spend more than our budget allows (a maximum of $300,000).
Going to open houses was eye opening and informative, but when the weather turned cold we didn’t attend as many (because brr). However, we didn’t stop going to open houses completely, which is where today’s story begins.
The open house in question was for a three bedroom, one bath home. It was built just after WWII but hadn’t been updated since the seventies. It had new siding and some new windows but was terribly dated inside. For those of you who are just tuning into my house hunt, dated is good because my husband and I plan to renovate.
It had a decent sized backyard, a forced air furnace (good for an eventual heat pump conversion) and a fireplace in the living room. There was a park across the street and the area was pretty quiet. Best of all? It was listed for $189,000.
Sounds pretty perfect, right? Unfortunately, there is a catch.
It was in the suburbs.
Now, I know the suburbs are great for a lot of people. There is more space and homes are more affordable. But that affordability comes at the cost of walkability, culture, and proximity to amenities.
I don’t want to live in the suburbs. In fact, my husband and I only decided to go and look at this house because it was so darn cute and it was only a few minutes (by car) outside of the city.
However, as I did more research on the location, I realized that a second car would be mandatory. The area is not well serviced by bus routes, there is a massive hill between it and the city core (bad for biking) and there are utterly no amenities around it.
But it was so cheap! My husband, in particular, was taken by its cheapness, which led to an argument. He only saw the low list price, and was turning a blind eye to the fact that we would need a second vehicle, and car costs can add up.
Naturally, to prove my point, I made a spreadsheet, and here’s what I found.
Let’s assume we bought this house within the next six months for $185,000 (before I reached my down payment goal) .
A 10% down payment plus closing costs would mean we’d need $22,576 at closing. A 2.49% five-year fixed term with an amortization of 25 years would result in carrying costs of $1,405 including utilities, property tax, and insurance. That is stupid low and I love it. But, we’d also need a car.
We don’t buy cars new, but our current vehicle is in decline, so our next car purchase should be one that’ll last at least ten years, be four wheel drive, and large enough to fit a car seat. A price point of around $15,000 would be plenty. The car would need to be financed because we don’t have any designated savings, and I’m sure not going to dip into my emergency fund right after buying a house. So a $15,000 car financed over five years at 2.9% would add $268.86 to our monthly costs. Let’s not forget extra car insurance, maintenance, and gas. Here’s how it breaks down:
So this cheap house isn’t so cheap. Once a second car is factored into the mix, the carrying costs are much higher. It’s actually more than I wanted to spend on fixed costs and more than we’re paying now. There would also be the trade off of being far away from amenities, getting fat from a sedentary lifestyle, and dealing with traffic every time we want to go to the city.
$185,000 in the ‘Burbs is Worth $280,000 in the City
For interest’s sake, let’s look at what $1,953 per month will buy in the city. To be fair, we’ll keep the down payment the same at $18,500.
If we bought a house for $280,000 with $18,500 down, that would result in carrying costs of $1,953. Here’s the closest example I could find of a home selling for $280,000.
This home is almost precisely the same, except in slightly better shape. It needs updating, that’s to be sure, but it is entirely liveable. It has three bedrooms, two baths, a large backyard, and plenty of parking. It’s not very close to downtown but it’s still near many parks, restaurants, and other amenities, and is easy biking distance to downtown, which means my husband and I could safely remain a one-car household.
Personally, I would prefer to stay in the city, put more money into an asset that won’t depreciate to zero (as cars are known for), and maintain my physically active lifestyle. It’s not for everyone, but that’s my preference. I guess you could say a walkable neighbourhood is worth $100,000 right off the bat, without factoring in other ongoing costs.
The suburban house was perfect, but not for us. The house hunt continues.
How much would you pay for walkability? Have you or would you choose the suburbs or the city? I want to know!