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Insane home values?

Discussion in 'Other Off Topic Forum' started by ferrarigtofan, Oct 14, 2005.

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  1. ferrarigtofan

    ferrarigtofan Formula Junior
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    #1 ferrarigtofan, Oct 14, 2005
    I'm looking to move from my present home, which is simply too large and too expensive. When I take a realistic selling price and divide it by the square footage I result with $233 per sq. ft.

    I was under the assumption if I buy 1/2 the house, it should cost 50% of my selling price, yeilding me a nice profit and the new home paid for in full.

    What I am finding is, 3BR ranches selling for $300+ per sq ft. I understand that smaller houses are cheaper in regards to total pricing, and thus have a larger market they appeal to, but a 30% premium for a 50 year old house that needs to be redone?

    I wonder what a home costs to build today, nothing fancy, just normal suburbia development quality including land. If I assume a .5 acre lot costs of $150,000 w/ improvements, and I build a 1500 sqft home at say $180 sq/ft (270,000), I'd have a total cost of $420,000. The home would be new and exactly as I want it, why would I pay more for old and not exactly as I want it? I know some will say it takes time to buy a lot, get permission, build, etc...but I am in no rush really.
     
  2. ILuv4Res

    ILuv4Res F1 Veteran
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    #2 ILuv4Res, Oct 14, 2005
    I am assuming that when you are doing your $/Sq.Ft. calculations, you are including the land value also. That makes it less of an apples-to-apples comparison since many times larger homes are grouped in the same area and smaller homes are grouped in the same area.

    Building new depends upon where you live. For example, I live in S. Florida, where there are strict building codes for hurricanes, which makes building here much more expensive than building in some other parts of the country. Regarding the land, again, it depends where you live. Here, we have very little raw land. Therefore, new construction now usually involves buying an existing house, demolishing it, then building. This can make it more expensive than if you found a vacant lot & built on it, therefore skewing your $/Sq.Ft. calculations if you're including every dime you spend into the calculation.
     
  3. ferrarigtofan

    ferrarigtofan Formula Junior
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    #3 ferrarigtofan, Oct 14, 2005
    Yes I have included land, comparing my .5 acres to other properties in the same town, same school system, same distance from the highway, etc...

    It just seems while they continue to build new big houses on every corner, the ones that are already up are not as good an investment as a 1963 ranch on a per foot basis.

    Here is the break down:

    1963 ranch, needs kitchen and baths redone, no modern items like koi pond, vinyl picket fence, 2 car garage selling for $425,000, ~1350 sq ft.

    1994 colonial (my house), 3000sq ft, modern alarm system, 2 car garage, $100,000+ landscaping, perfect inside and out worth $700,000

    2005 colonial (being built), 3000 sq ft, basic home but builder provides grass seed for landscaping, no alarm, etc...$850,000.

    The new home is paying $50 more per sq ft, over my selling price. Of course new is new, but the new home is also going to pay 50% more taxes. The town has my value at $350,000 on the tax roles, and I am paying $13,200/year. The new homes that have closed are paying $18,000+/year.

    It just appears as I am stuck in the middle, going smaller does not result in value per sq ft, and no one will pay me $850,000 for my 11 year old home when you can get new for the same price.
     
  4. ROGUE GTS

    ROGUE GTS Formula Junior

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    #4 ROGUE GTS, Oct 14, 2005
    Are you in a hurry to sell? I'd hold out a bit and see what comes along. Personally I prefer a little bit of land and a nice ranch style over some suburban spec house where there are 50 others that look exactly the same.

    Have you checked to see if people are placing bids on those for $850k? Is it a case of a developer raising prices in the entire area to make it seem more appealing?
     
  5. sjb509

    sjb509 Guest

    #5 sjb509, Oct 14, 2005
    Your profile says you are self employed. If your chosen profession means you can relocate, you could save a tremendous amount of money relocating to other areas of the US. I'd seriously think about selling now and get out while the gettin' is good. A year from now who knows what the market will be like.

    Reading between the lines, I assume you will end up with around $400k of equity if you would be buying a smaller house in the same area, using the numbers given.

    $400k will buy a nice house in most midwest cities. Much lower taxes as well. A family moved in across the street from us this summer. Sold a modest home in CA and moved to the midwest (albeit in BFE), paying cash for a brick 5000 ft^2 house three years old with a huge yard and all the goodies.

    If it is something that is possible for you and your family, great. If not, just remember it is much easier to get used to doubling your square footage than it is cutting it in half.

    BTW, our house is worth about half yours. More sqaure footage, oversize three car garage, many extras and upgrades. Built in 2002. I pay $2300 in taxes per year.
     
  6. ferrarigtofan

    ferrarigtofan Formula Junior
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    #6 ferrarigtofan, Oct 14, 2005
    The $850,000 houses sell as fast as they can slap them up.

    Once you break $1,000,000 the houses begin to sit again and are again getting about $250 sq ft like me.

    There are pockets of insane values, like the 1350 sq ft ranch. I just do not see what makes a 50 year old house that needs updating worth 30% per sq ft. If I pay $420,000 and put $80,000 into the house I have a $500,000 investment. I have $565,000 in the house I am in. The numbers do not make sense, as I have no mortgage.

    I sell for $700,000, after paying everyone I have $630,000 cash. My profit would be $125,000 on my home.

    If I have to spend $500,000 to get a smaller home up to snuff, my total realized gain is $130,000.

    I feel that eventually my home has less downside risk as an investment than the 1963 ranch. When the market tanks, I can still get out even. If I have $500,000 in a small ranch I may take a $200,000 loss in a bad market.

    So again, what is driving these old homes that were the last to appreciate in this cycle to now be worth more than their more modern counterparts on a per sq ft basis?
     
  7. Dcup

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    #7 Dcup, Oct 14, 2005
    in the northeast of the US, its approx $120.00 per square to build.
     
  8. Erich

    Erich Formula 3

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    #8 Erich, Oct 14, 2005
    Because home values are more complicated than $/ft^2.
     
  9. Lexdiamonnyc

    Lexdiamonnyc Formula Junior

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    #9 Lexdiamonnyc, Oct 14, 2005
    ha...a good friend just bought a 5,000 SF house with 12 acres of land for $246k about 15 minute out of San Antonio, TX.........I think I'm moving to TX!!!!!!!!!!!!
     
  10. ferrarigtofan

    ferrarigtofan Formula Junior
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    #10 ferrarigtofan, Oct 14, 2005
    When will you be over to kill my wife, I want to establish a solid alibi. LOL
     
  11. SRT Mike

    SRT Mike Two Time F1 World Champ

    Oct 31, 2003
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    #11 SRT Mike, Oct 14, 2005
    Home prices are nuts.

    My home is a small ranch, about 1,500 sq-ft in the nice part of an OK town. The "bad" part of this OK town was nice but just smaller when I moved in many years ago, and the next town over was crap. Now the crap has started to infiltrate my town, and I personally would not want my kids going to the schools in my town (I dont have kids now so no big deal). I used to work in Boston so the fact that I was 20-30 minutes drive to Boston was nice. The house cost $200k many years ago (during the last bubble). My neighbors homes have been going up for sale for $500k. That is absolutely NUTS. These are 1960's homes with no basement (concrete slab foundation), small attic (not able to stand up in there). I have about an acre of land, a seperate 3 car garage, new kitchen, bathrooms, roof and driveway, most have 1/4 acre of land so I dont even know what my home would be worth but certainly over $500k.

    My brother bought a house further north near the border of NH. He paid $295k for the home, which is about 2700 sq-ft, brand new construction, colonial style (same style as almost all new homes it seems), all hardwood floors and he had the floorplan modified to his taste. He was first in the development and waited a year for the home. The one across the street sold last year for $550k and they're probably in or close to the 600's now. Houses are popping up everywhere.

    I look at his house and its so much better than mine. The only thing I have is location. I look further north and I see what I can get for $600k a little further up in NH and it blows my mind. I have a 5 year lease with 4 years left on my current business space, and after thats up we are going to build our own building somewhere in NH most likely and I will move up there. We sell nationwide, so where we make the stuff is irrelevant. Labor is cheaper in NH, no state income tax OR state sales tax. High property taxes but its more than offset by the savings from MA income and sales tax. You can buy a big nice house up there for $700k - I'm talking like 4500sq-ft and quality materials throughout.

    Home prices are nuts. IMO the house I am in is "worth" $250k. The fact that people are willing to pay more than double that for it just blows my mind.
     
  12. MS250

    MS250 Two Time F1 World Champ
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    #12 MS250, Oct 14, 2005
    Home value per section of a city is always different.

    Its called LOCATION, LOCATION , LOCATION....here in Toronto,Ont, there is no such thing as similar area. people like to think that it is, buts its not. Each town has a different bylaw, some scoold are better than others, garbage pick up is better in some areas than others.

    I think your a problem with this because there are probably no two homes the same when you compare a muture area with a home form the 60s.

    The newer homes dont seem as attractive in price because those are more shall I say (cookie cutter) type of home which appeals to the masses.

    End of day, if its cheaper for you to build for 450k than you shoudl look at that option more than a home 40 yrs old. I would build for the same if all is equal, or somewhat equal.

    my .2c
     

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