A study of commute times
My friend Sasan was in town at the begining of the week, and we discussed our commutes and why I chose to live where I do. One of my points was that it would cost about $300,000 for a house in a similar neighborhood with a 15 to 20 minute commute. This was not the focus of our discussions, but it made me think about the difference between a 15 minute commute and a 45 minute commute was in terms of home value.
For simplicity, equity from mortgage payments will be linear, taxes and home values will be fixed. Here is our data.
| Home Value | $150,000 | $300,000 |
| 5% down + 1.5% fees | $9,750 | $19,500 |
| 80% 1st mortgage payment 30 years at 4.5% |
$608.02 | $1,216.04 |
| 15% 2nd mortgage payment 30 years at 8.0% |
$165.10 | $330.19 |
| Yearly taxes at 2.5% after $20,000 homestead exemption |
$3,250 | $7,000 |
| Yearly equity | $4,750 | $9,500 |
| Yearly interest | $4,727.44 | $9,054.76 |
| Yearly Expense | $7,977.44 | $18,554.76 |
Thats a difference of $10,577.32/year. I loose 5 hours a week commuting, 50 weeks a year, totalling 250 hours a year. So I am making $42.31/hour by not owning a $300,000 house 15 mintues from my place of employment. Even with that conservative number, I make more money driving home not owning that $300,000 house than my hourly salary.
This actually is much lower than I initially suspected. It is an interesting perspective to view the value of a home in as well.