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What’s the Real Cost of a Millennial-Friendly ‘Farm House’?

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Once upon a time, the American Dream centered on buying a comfortable home complete with a white picket fence in a quiet suburban neighborhood. While there are still plenty of first-time home buyers who are chasing that vision, many millennials are shaking things up in their approach.

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Instead of holing up in private communities with cookie-cutter homes, golf courses and swimming pools, 20somethings are headed for neighborhoods where farming is the order of the day. Dubbed “agrihoods,” these sustainable communities outfitted with community gardens, livestock and orchards are popping up all over the country, and they’ve become especially popular in Southern California.

While the concept is catching on in a big way, buying into the lifestyle isn’t a cheap proposition. We decided to take a closer look at what millennials can expect to pay to settle down on the farm.

Calculating the upfront cost of buying a farm house

Agricultural neighborhoods come outfitted with lots of extras which serve to drive up home prices. For example, The Cannery in Davis, CA offers amenities like an amphitheater, a park, a spa and a town center where local businesses have set up shop. All of that comes with a price tag ranging from $400,000 to over $1 million, depending on the home you choose.

So how realistic is that for the average millennial home buyer? Let’s break it down, using a scenario involving a young couple we’ll call David and Susan.

David and Susan are 28 year-old newlyweds who have their eye on a $400,000 home in The Cannery. Because it’s under the FHA loan limits for Yolo County, they can either try to get an FHA loan or a conventional mortgage. To put the cost into perspective, the average mortgage debt for the county as a whole comes to just over $254,000 according to Credit Sesame’s internal data.

If they take the FHA option, they’re looking at a 3.5 percent down payment which comes to $14,000.

If they go the conventional route without an FHA loan, they’ll need the following:

  • 20 percent down to the table to avoid private mortgage insurance
  • That bumps up the amount they need to save to $80,000
  • Assume a conservative 2 percent for closing costs
  • Assume 1 percent earnest money
  • Total estimated cost Susan and David will need: $9,600 to $11,500

Budgeting for the long term

Aside from the upfront costs, our happy couple also has to factor in the ongoing expenses that go along with a mortgage. That means things like the interest rate, homeowners’ insurance, property taxes and HOA fees.

Let’s assume that David and Susan have been diligent about building a positive credit history and they both have credit scores in the 750 range. That potentially qualifies them for an interest rate of 4.15 percent (*interest rates are subject to change).

Here are more calculations, based on their credit score of 750 and mortgage interest rate:

  • If they were to get a conventional loan and put 20 percent down, their monthly payment would come to around $1,550
  • Property taxes would be around 1.5 percent
  • Homeowner’s premiums would total to about $800 annually and
  • HOA fees would run them about $100 a month
  • The total monthly cost of maintaining the home would come to a little over $2,100

If they opt for an FHA loan with a smaller down payment, they’re looking at closer to $2,600 a month just to cover their housing costs.

Potential savings on electricity and organic fruits and veggies

There is a trade-off here in the form of some built-in savings, which can make the home purchase numbers seem a little less intimidating. For example, homes in The Cannery are solar-powered, which means our couple’s not going to be dealing with a high monthly electric bill.

According to the California Public Utilities Commission, residents in the Central Valley region (which includes Yolo County) pay $172 a month on average for electricity in summer and $102 a month on average in winter. Our couple could easily save between $1,000 and $2,000 a year on utility costs.

This couple will also save money on food. Instead of shelling out big bucks for organic fruits and vegetables, they will have access to a community garden. One couple, for instance, claims to save $24,000 a year by raising their own crops.

So, can they afford it?

Now that we’ve crunched the numbers on what it costs to buy one of these homes and maintain it, is it an affordable option for our couple?

Assuming they take out a conventional loan and put 20 percent down, they’d need to finance $320,000. Their other debts include a $300/month car payment and they pay $600 a month toward student loans. Homeowners’ insurance, property taxes and HOA fees for the home come to $6,800 a year.

Together they need to earn around $90,000 a year to pull this off. It depends on their income and existing debt (hopefully low). As of 2014, the median household income in Davis was just over $57,000, according to the Census Bureau. That’s $2,000 higher than Yolo County and $7,000 higher than nearby Sacramento County.

Payscale puts the average salary for Davis residents with one to four years of experience at right around $50,000. If they both work full-time, their dream to own a farm home may not be too much of a stretch.

Great credit is essential in buying a home

There is one important caveat to keep in mind. This hypothetical scenario assumes that our home buyers have great credit.

According to Credit Sesame’s internal data, the average millennial has a credit score of 624, which is not great and would certainly drive up the cost of a mortgage.

With a score on the lower end, our millennials might be forced to go the FHA route to win loan approval. A 3.5 percent down payment would translate to a higher monthly housing payment. Based on the housing costs we estimated above, they’d need to earn closer to $120,000 to afford the home.

As demand for suburban farms continues to grow, it’s likely that they’ll continue to attract more millennial home-buyers. While life in an agrihood may not be right for every 20-something, it’s not out of the question for the ones bringing home a decent paycheck.

Working on getting your credit score in shape and socking away enough money to cover your down payment and closing costs can put you a few steps closer to realizing your urban homesteading dreams.



Andrea Osmun contributed to this post.

Rebecca Lake
Rebecca is a financial journalist from North Carolina. She has a Bachelors in Political Science from the University of South Carolina. She covers the intersection of public policy and personal finance.

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