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If you are choosing between a cheaper resale home that is farther out of the city and a pricier new-construction home closer to work and other amenities, which option is more affordable? Spoiler alert: The lower sticker price isn’t always the least expensive over time.
While house hunters often dial in on list price and mortgage rates to determine a potential home’s affordability, those costs are only one part of the equation, NewHomeSource reports. Transportation is usually a household’s second-biggest monthly cost after housing, but house hunters rarely include these costs when choosing a home.
“Consumers are often surprised when they learn the cost per mile for driving. Most people think of it in terms of a monthly car payment or a tank of gas, but when you look at the true cost of driving, that includes things like depreciation on the vehicle and maintenance, the cost is much higher than most expect,” says Greg Brannon, Director of Automotive Engineering with the American Automobile Association (AAA).
Meanwhile, commutes are getting longer, and more cars are on the road thanks to suburban sprawl and solo commuters. According to Census data, the mean one-way travel time for commuters in 2024 was 27.2 minutes, slightly higher than the year prior. The number of workers with a one-way commute that exceeded 60 minutes climbed as well.
Today’s affordability challenges sharpen focus on the “location, location, location” mantra of housing, which is part of the reason new construction homes are gaining traction with affordability-minded buyers. New build master-planned communities often benefit from prime locations. Developments are increasingly being developed near major employers, transit hubs, and key commuter routes, with essential daily-use amenities close to home.
Less travel time for daily necessities equals lower overall costs. Homeowners can save a significant amount of money just by living closer to where their lives happen.
Include Transportation Costs to Measure True Affordability
Housing affordability is typically measured by the 30% rule: monthly housing costs should not exceed 30% of a household’s gross income. Housing costs usually include mortgage payments, property taxes, HOA fees (if applicable), home insurance, and sometimes utilities.
Using that metric, approximately 55% of U.S. neighborhoods are considered affordable, according to the Center for Neighborhood Technology (CNT), a not-for-profit group that studies the relationship between housing, transportation, urban infrastructure, and affordability, among other initiatives. However, when you combine housing costs with transportation costs, the number of ne