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A newly updated economic model developed by NAHB enables builders, developers, prospective home buyers and home owners to see the impact that various physical features and neighborhood characteristics might have on the price of a home.
Looking broadly at the four principal Census regions of the country and the urban status of areas — central city, suburb or non-metro — NAHB’s online house price estimator finds a general tendency for house prices to be higher in the Northeast and West, as well as in central cities and suburbs.
The price tends to be lowest for homes built outside of a metro area, although some regional variation exists regardless of urban status.
The model estimates that the standard new home will cost more than $500,000 if it’s built in a suburb of one of the large metro areas in California, but only about $155,000 if it is located outside of a metropolitan area in the Midwest Census region.
The standard new single-family detached home is definied by these features, which are based primarily on averages or medians from the Census Bureau’s Survey of Construction:
- 2,150 square feet of living space
- Two full bathrooms and one half bath
- Three bedrooms
- Construction on a slab foundation
- A garage, found in 70% of the single-family homes built since the mid-1980s
- Central air conditioning, found in 90% of single-family homes
- A fireplace, which was in more than 50% of the homes since 1974 up until 2010, when homes with a fireplace were slightly below 50%
- A separate dining room, which the 2009 American Housing Survey found in 2.2 million out of 3.8 million new owner-occupied housing units
- Three miscellaneous rooms
- Satisfactory shopping (grocery or drug stores) within 15 minutes of the community or neighborhood, which the AHS found reported by 3.4 million out of 3.8 million — or nearly 90% — of new home owners
In general, the estimator finds that suburbs show higher prices than their companion central cities, which include the areas inside the city limits and not just a central business district or downtown area.
“Because the model uses data from the American Housing Survey (AHS), which contains somewhat limited geographical detail, the results show averages across a broad region rather than estimates for a particular house in a specific location,” said Paul Emrath, NAHB’s vice president for survey and housing policy research.
The price estimator, which can be accessed on computers with Microsoft Excel, can be useful in a variety of settings, he said.
“Home builders might use the estimator to help determine if the cost of providing a particular amenity will be valued by consumers,” said Emrath.
Households considering purchasing a new home “can use it as a preliminary search tool, to get a rough idea of likely price differences for different sizes and amenity packages,” he said.
Existing home owners can use it for an idea of how much it would cost to trade up to a home that is newer, larger or with more amenities.
Home owners can also use it to approximate how much particular remodeling jobs would add to the value of their homes, he said, which is also useful information that remodelers can provide to their prospective customers.
And developers can use the estimator to help price neighborhood characteristics, which can help them evaluate the desirability of potential building sites.
For example, the estimator shows that a location on a body of water — such as a lake, a river or the ocean — is the neighborhood amenity with the largest positive impact on the price of a home.
Moving the standard Southern suburban new home to an otherwise similar neighborhood on the waterfront increases its estimated price by nearly $90,000.
Proximity to adequate public transportation comes in a distant second, raising the estimated price by about $26,000.
Other neighborhood features, the model finds, can reduce the price of the home.
The presence of an abandoned building within half a block, for instance, reduces the estimated price of the standard new home in a Southern suburb by about $28,000.
Bad roads, odors, lack of adequate shopping, buildings with metal bars on their windows and litter each reduced the estimated price by more than $6,000.
"This information," Emrath said, "can help community associations and local governments estimate how certain public policies — such as providing public transportation or finding uses for abandoned buildings — are likely to affect home values in their neighborhoods."
Looking at the physical features of the home, the model shows that with no modification, the estimated average price of the standard new home in a Southern suburban is $203,874.
Adding 500 square feet of living space with no other changes increases the estimated price of that home by roughly $13,000.
Adding another bedroom or miscellaneous room increases the estimated price by less than $10,000, and the addition of other types of rooms has more impact.
The greatest impact on the home’s value comes from adding a third full bathroom, which increases the estimated price by about $43,000.
Eliminating the fireplace reduces the estimated price by about $24,000.
The Single-Family Detached House Price Estimator can be found on NAHB’s website at: www.nahb.org/housepriceestimator.
To run the estimator, Microsoft Excel’s security setting must be adjusted to allow macros to run.
For those who encounter trouble getting the estimator to run initially, NAHB suggests that they try accessing it from a different computer with a different browser.
To read a special study from NAHB Housing Economics — “NAHB House Price Estimator Updated” — go to: www.nahb.org/updatedestimator.
For more information, email Paul Emrath, or call him at 800-368-5242 x8449.