Wednesday, April 06, 2005

What is (More) Affordable?

The first step in this exercise ought to be defining what we mean by "(more) affordable." What's our target?

Although many of the ideas we'll be looking into here can be applied to renovation projects, I'll mostly be talking about new construction.

I'm thinking it will be a bit like Sarah Susanka's approach to the "not so big" house. She says, take the size of the house you think you need, and work toward making it 20% smaller. So one approach would be to take our 2005 standard $225/SF budget figure for new construction, and work toward reducing it by say 20%, which would make our target $180/SF.

Another approach would be to roughly calculate the mortgage a hypothetical client might be comfortable with. According to the US Census, in 1999 median income in Seattle for householders 45 to 54 years old was $58,777. (There were almost 6,800 male and 1,700 female architects, surveyors, cartographers and engineers in Seattle in 2000 by the way. Clearly it's not us architects who were skewing that median income up to $58K!) Younger householders made slightly less, older householders slightly more. Let's round it off to $60,000/year for a household. The classic 33% devoted to mortgage yields $1650/month. At a fixed rate of 5.25% over 30 years, that will get you a loan for about $300,000. Let's assume our hypothetical client has equity from an existing home or enough cash to cover a 20% or so downpayment, so we'll round off the total price to $350,000.


Down the street from us, a house in need of a complete renovation just sold for $425,000. A modest renovated 40's three-bedroom bungalow is for sale for $616,000. It appears our hypothetical client will need more equity, if they want to build in the Seattle metropolitan area. Land costs may be less in unincorporated King County, but other costs (both financial and environmental) would be higher.

A couple of recent prospective clients have had construction budgets in the $350,000 to $500,000 range. Setting aside $50,000 for site development costs, that leaves $300,000 to $450,000 for construction. At $180/SF we'd be looking at a 1,700 to 2,500 SF house including basement (if any) and garage.

I think we're closing in on a general idea. More later.

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