A Tale of Two Houses
So, Mr. Pink and I have been keeping an eye on real estate prices, because some day, when our net worth is positive instead of negative, we might like to buy a home. There are some encouraging signs--prices seem to be falling, even in our little beach community, and buyers have a wide selection of houses from which to choose. Of course, interest rates are rising, and "non-traditional" borrowers (like me) who don't have a steady income are unlikely to find competitive rates. We won't be buying a house soon, but it is still a goal.
The problem is, some prices still seem completely out of line with reality. For example, there are currently two houses for sale on the same street. They are even on the same side of the street, separated by just five houses.
The cosmetic differences are obvious. One home is vacant and plain. It has a somewhat neglected air. The paint is dull, the driveway is cracked, and the lawn is dead. The other home is filled with beautiful furniture and fresh flowers. The paint is bright and glossy, the lawn is a vivid green, and the home is trimmed with lovely fieldstone.
There are differences on the inside, too. The vacant home has worn-out floor tiles and chipped countertops. The carpets look a bit dingy, and the paint on the walls is a strange mustardy color. The other home boasts granite countertops, hardwood and travertine floors, and fresh, neutral paint. It also has stainless steel appliances.
But aside from the cosmetic differences, these two homes aren't so different. Both were built in the early 1970s. Both have fireplaces. Both have two-car attached garages. Both have views of a canyon. Both have similar floor plans, although one has an extra bedroom and a little more square footage. What really sets these two homes apart is the price.
The somewhat dingy bank-owned home has four bedrooms and two bathrooms and is approximately 1700 square feet. It's listed for $569,900.
The fixed-up home with the granite and the stone and the stainless steel has three bedrooms and two bathrooms and is approximately 1600 square feet. It's listed for $850,000.
Am I doing the math right on this one? Is this home really listed for $531.25 a square foot? Remodeling a kitchen and bathrooms and putting in hardwood floors couldn't possibly cost $280,000 for a 1600 square foot house, could it? So why is the price so high? Have we as a community so fetishized granite and stainless steel that we think homes with those features are worth astronomical sums of money?
Let's consider some of the other homes for sale nearby. There is a home a few streets over (in the same building tract) that also has three bedrooms and two baths, with 1600 square feet. It also has granite and travertine and crown moldings and cherrywood cabinets. It's listed for $599,000. Less than two miles away is a four-bedroom, two-bath house with 1900 square feet. It, too, has hardwood and granite, and it's listed for $649,900. At the other end of the scale, there is a home in a much nicer neighborhood with four bedrooms and two-and-a-half baths listed for $879,000. Then again, it has 2431 square feet of living space, not 1600!
So what makes this one little 1600-square-foot house worth $850,000? Absolutely nothing. It's not even in the realm of reality. I know it won't sell for anywhere near that price, if it ever sells at all. I mean, I hope the lenders have wised up and won't lend $850,000 on a house when others in the neighborhood are priced at $569,000 to $599,000 and may not even sell at those prices. What happened to comps? What happened to neighborhood values?
Well, I guess it's important to remember one thing: "Askin' ain't gettin'." And that's that.
The problem is, some prices still seem completely out of line with reality. For example, there are currently two houses for sale on the same street. They are even on the same side of the street, separated by just five houses.
The cosmetic differences are obvious. One home is vacant and plain. It has a somewhat neglected air. The paint is dull, the driveway is cracked, and the lawn is dead. The other home is filled with beautiful furniture and fresh flowers. The paint is bright and glossy, the lawn is a vivid green, and the home is trimmed with lovely fieldstone.
There are differences on the inside, too. The vacant home has worn-out floor tiles and chipped countertops. The carpets look a bit dingy, and the paint on the walls is a strange mustardy color. The other home boasts granite countertops, hardwood and travertine floors, and fresh, neutral paint. It also has stainless steel appliances.
But aside from the cosmetic differences, these two homes aren't so different. Both were built in the early 1970s. Both have fireplaces. Both have two-car attached garages. Both have views of a canyon. Both have similar floor plans, although one has an extra bedroom and a little more square footage. What really sets these two homes apart is the price.
The somewhat dingy bank-owned home has four bedrooms and two bathrooms and is approximately 1700 square feet. It's listed for $569,900.
The fixed-up home with the granite and the stone and the stainless steel has three bedrooms and two bathrooms and is approximately 1600 square feet. It's listed for $850,000.
Am I doing the math right on this one? Is this home really listed for $531.25 a square foot? Remodeling a kitchen and bathrooms and putting in hardwood floors couldn't possibly cost $280,000 for a 1600 square foot house, could it? So why is the price so high? Have we as a community so fetishized granite and stainless steel that we think homes with those features are worth astronomical sums of money?
Let's consider some of the other homes for sale nearby. There is a home a few streets over (in the same building tract) that also has three bedrooms and two baths, with 1600 square feet. It also has granite and travertine and crown moldings and cherrywood cabinets. It's listed for $599,000. Less than two miles away is a four-bedroom, two-bath house with 1900 square feet. It, too, has hardwood and granite, and it's listed for $649,900. At the other end of the scale, there is a home in a much nicer neighborhood with four bedrooms and two-and-a-half baths listed for $879,000. Then again, it has 2431 square feet of living space, not 1600!
So what makes this one little 1600-square-foot house worth $850,000? Absolutely nothing. It's not even in the realm of reality. I know it won't sell for anywhere near that price, if it ever sells at all. I mean, I hope the lenders have wised up and won't lend $850,000 on a house when others in the neighborhood are priced at $569,000 to $599,000 and may not even sell at those prices. What happened to comps? What happened to neighborhood values?
Well, I guess it's important to remember one thing: "Askin' ain't gettin'." And that's that.
posted by Astera @ 9:53 PM
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