Tuesday, November 27, 2012

The Price/Commute Relationship

My buddy Scott Bernstein in Chicago has long been an advocate of location-sensitive mortgages--won't your overall costs go down if instead of paying the monthly fees associated with a car, you took public transit (or even cheaper, our casual carpool)?  And if so, can't you afford a more expensive mortgage payment?  Fannie Mae did a pilot several years ago in which borrowers could borrow more than the ratios might have suggested, if they lived in public-transit land.   [I didn't realized they dropped the program, but back in those days, everyone could borrow more than the ratios suggested.....].

So why raise this now?

First, the NYT did a story on the idea, and second, I'm always intrigued about how households intuitively adjust home prices based on these factors.  Our schools are a bit better (according to US News) than the public schools through the tunnel, but our home prices are stronger in part because of our demonstrably shorter commutes to the City.  People are willing to pay more to enjoy that second latte in the morning with kids, or to get home to the soccer game more conveniently on those spring evenings.

And when you can save over $12,000 on average over 15 years by using casual carpool in the a.m.--I just did the math--moving to Piedmont seems like a really smart idea!

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