Brand New Construction Purchase Price for a 4-bedroom Home
Morris County Cost of Living Series
The house purchase item carries 70.9% of the weight in the Housing Index. With the mortgage rate, housing (when purchased) is 19.90% of the weight for the Composite Index, making it by far the most heavily weighted item priced.
The houses that were used for 1Q19 at the edge of the allowed 60 min commute. Except for one sub-division. It violates the single family home – so the C2ER board will have to approve. But its just about everything else asked for. And in Morris Township!
You’ve probably guessed that its the properties being built at the old Honeywell site. Here’s how they showcase Morristown: https://www.youtube.com/watch?v=j9uIGMemSS8. Click on photo to see more pictures and specifications.
Participants must adhere strictly to all specifications for the house purchase. It doesn’t matter whether the specified house is typical of your area or not: for the Index to be valid, we must price the same house (with the exception of limited regional variations discussed below) everywhere. We can agree – but it’s still really hard in our area!
Specifications: Here are the specifications to use in determining the full purchase price of the house:
(1) Location: Good subdivision or other area convenient for schools and shopping, within an area offering full municipal services; water, sewer, police and fire protection; area typical for professional and managerial households in top income quintile.
• Subdivisions/neighborhoods sampled should be suitable for the social needs of the professional and managerial households in the top 20% of households on income.
• In large metropolitan areas where commuting time is an important factor in choosing a home, price houses within 60 minutes commuting time at rush hour from the central business district.
(2) Lot size: 8,000 sq. ft. (The lot requirement is waived altogether for the Borough of Manhattan in New York City, and may be waived with the concurrence of the Cost of Living Index project manager for other areas that entirely lack single family detached homes.)
(3) Living area: 2,400 sq. ft. (Excluding garage).
• If new homes in your area typically have basements, any fully finished basement space is included in the 2,400 sq. ft. living area. Partly finished or unfinished basement space is not considered living area. (Fully finished basement space is comparable to other rooms in the house in terms of finish, for example carpeted if the house is carpeted and is part of the area centrally heated and/or airconditioned.)
(4) General house description: Single-family detached house; newly built and not previously occupied. The house conforms with Marshall & Swift’s rating of “Very Good Quality” as set forth in its Residential Cost Handbook. The house is built in a high-quality tract or development and is often individually designed and custom-built or of comparable quality. Special attention has been given to exterior and interior details. Irregular shapes and angles will be common, as will large eaves and overhangs. Basic features:
- 4 bedrooms
- 2 full baths
- Living room
- Dining room
- Kitchen with built-in cabinetry and cooking island
- Finished family room
- One fireplace (if standard in your area)
- Utility room
- Attached two-car garage
(5) Age: Newly built; not previously occupied. You can determine the purchase price for the specified house in two ways:
• Price real houses. Be sure your sources report selling price, rather than asking price. The best way to get the proper construction quality is to contact your local homebuilders association and ask for names of builders who are building homes of the specified quality. Except in the largest metropolitan areas, such homes are almost always custom homes rather than spec homes. When you have your list, call the builders and ask if they have any model homes open; and if they do, actually visit a few of these models to make sure they meet the specifications. Walk through the models to make sure. Once you’ve qualified the builders, you can contact them each quarter and determine the current price or
price per sq. ft. for the models that meet C2ER specifications. It’s unlikely that you’ll find homes of exactly 2,400 sq.ft. on lots of exactly 8,000 sq.ft. If the size of either the house or the lot differs appreciably (50 sq.ft. of living area could easily alter the price by $2,750) from the specifications:
• Determine how much a comparable unimproved lot in the same neighborhood or subdivision would sell for.
• Subtract that price from the total price of the property. This gives you the value of the dwelling alone. • Prorate the lot price to an 8,000-sq.ft.equivalent price.
• Prorate the dwelling price to a 2,400-sq.ft. equivalent price. • Add the two prorated prices to obtain the price to report.
• If you can’t find new houses that meet the specifications, determine what such a house would cost if it were to be built in your area. Builders and developers generally can determine this figure easily when you give them the detailed specifications. Be sure to include the lot price, don’t report construction cost only. The insistence on new housing isn’t capricious. Homeownership costs include periodic maintenance (painting, roof repairs, and so on), which generally are nil when the house is new, but rise with the age of the house. This is why buyers pay a premium for a house that hasn’t been previously occupied. Since the Index contains no item representing home maintenance costs, the cost of homeownership is understated when resale housing is priced.
(6) Type of construction: Conventionally built on site; not prefabricated or modular construction.
(7) Style: Stipulate whatever style or mix of styles is most common for new homes in your
C2ER’s Cost of Living Index measures regional differences in the cost of consumer goods and services, excluding taxes and non-consumer expenditures, for professional and managerial households in the top income quintile nationally.