Smart Moves by Ellen James Martin

Assessing How Much You Can Really Afford

In the years before the housing market tanked around 2008, homebuyers were far less risk-averse than they are now. Nowadays, many buyers, especially young adults, are undershooting their affordability range.

Take the case of a couple in their mid-30s who recently purchased a trade-up property in suburban Maryland. In doing so, they spent less than half what their mortgage lender said they could afford.

“They were shocked at how big a mortgage the lender would have given them. They didn’t want to go anywhere near that high,” says Ashley Richardson, the real estate agent who represented the couple.

Richardson, who’s affiliated with the Long & Foster realty firm in the Baltimore area, says many young adults are conservative in their financial habits because of vivid memories of the Great Recession.

There are other factors affecting the reluctance of many young adults to max out their real estate spending. Going forward, many believe home value appreciation will slow. Yet they anticipate higher living costs, especially for utility expenses, medical care and other services.

“My clients are paying as much as $2,000 a month per child for preschool care,” Richardson says.

All this is not to say young adults are any less motivated than were their parents to buy property. But they want to be sure any home they buy will be affordable for years to come.

Here are a few pointers for buyers:

-- Don’t underestimate your upkeep expenses.

James W. Hughes, a housing expert at Rutgers University, says one strategy for containing homeownership expenses is to buy a place from a builder with high construction standards. That way you can expect relatively low repair and appliance-replacement costs for a period of five to 10 years, as opposed to the often high upkeep costs of older homes.

He also recommends you think twice about the upkeep costs of owning a house with a lot of wood trim and siding, which will probably need extensive repainting every few years.

One way to gain help in approximating future upkeep costs is to be sure your home inspection is done by a well-trained inspector. One source of referrals: the American Society of Home Inspectors (

Are you contemplating a property with a large yard and expecting to hire a landscaping company to keep up the grounds? In that case, Hughes says you can assume the cost of yard work will increase in coming years.

-- Chart the trend for homeowner association fees.

Whether you’re planning to move to a gated community in the suburbs or a condo in an urban setting, the odds are you’ll be subject to a monthly fee to cover the costs of maintenance, security and other common expenses.

Before you commit to any property with a monthly management charge, Hughes says you should get detailed information on these charges, going back multiple years. Then examine the numbers carefully to see if inflation has been a major factor pushing up these costs. If so, he says you should assume this trend will continue in coming years.

“When you’re buying a home, you really need to become an amateur accountant, calculating not only your monthly mortgage payment, but also all the other costs of living there,” Hughes says.

-- Calculate your affordability range with commuting costs in mind.

In recent years, gas costs for commuting have been relatively moderate. But Christopher Leinberger, a professor and housing expert at George Washington University, says energy costs could well increase in the future, as the country grapples with the impact of climate change.

Too few prospective buyers anticipate their commuting costs down the road, Leinberger says.

He estimates that the average vehicle used for commuting now costs more than $7,000 a year to operate, when all the associated expenses are taken into account. And he projects these costs could rise dramatically in the future, particularly for those living in outlying suburbs. That means that finding a cheaper residence in an outer-tier suburb could be false economy.

If possible, Leinberger encourages buyers from a dual-income household to look for a property from which at least one spouse could walk to work or commute by public transit. That way, the household could slim down to a single vehicle, saving lots of cash in the process.

-- Think ahead about utility costs for your property.

“Anyone who hasn’t noticed rising utility costs has been sleepwalking through the last decade,” says Hughes, the Rutgers professor.

Perhaps you’re smitten with a brand-new Tudor with five bedrooms and a home theater equipped with an oversized TV. Or maybe you fancy a big old Victorian with lots of architectural flourishes.

Either way, Hughes urges you to take into account the future costs of heating and cooling any place you plan to buy.

“Be sure to ask the current owners to give you two to three years' worth of utility bills for the property. Notice the trend, keeping in mind that energy costs will undoubtedly keep rising,” he says.

(To contact Ellen James Martin, email her at