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Residential Median Sale Price per Sq Ft
Old 03-15-2013, 09:47 AM   #1
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Residential Median Sale Price per Sq Ft

No matter how many times I see the numbers, it never ceases to amaze me how varied home prices can be in the US. Hard to imagine my house would cost 3-4 times as much, or have to be 1/3rd-1/4th the size in another city. And these are medians, I know there are tony areas where price per sqft is in the 4 digits.

I watched two apparently late 30ish school teachers, with no kids (yet), on House Hunters last week buying a large $800K house without batting an eye. Beyond my imagination.

Simple things amuse simple minds (me).
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Old 03-15-2013, 09:59 AM   #2
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Yeah, I live in the Atlanta area and it stinks that most places I want to move to are on the left side of that chart. Vegas is not out of the question and appears to be a bargain now. I want to be out west somewhere but I'm not spending a fortune on a house.
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Old 03-15-2013, 10:13 AM   #3
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Midpack,

I could not agree with you more, blows me away. But there is a bit of additional data to consider. I see you live in the metro Chicago area. As you know full well, depending on where one locates across the metro area, the quality of the public school system varies dramatically as does the cost of home ownership. In the US, to a large but not complete degree, the quality of education available to children is directly proportional to the value of the parent's home. Makes no sense to me, but little about this country does.

As a specific example, we lived in a solid middle to upper middle community in the Western Suburbs of Chicago, offerings and outcomes in the local school system were mid level. We sold (at the time) a $325,000 home and moved to a very small (smallest on the street) home on the North Shore at $425,000. Both of our children were engaged in programs and offerings that were not even available in the other system. Both graduated near the top of their HS class, both graduated Summa, Phi Beta Kappa from very highly ranked colleges, on full tuition scholarships. Checking back with the old system, no child from the old system had been admitted to either of their colleges, and very few admitted to first rank schools. Both now engaged in professional life.

Sometimes paying more per square foot yields big dividends.

But I still take your point, when I see folks whom I am confident are really stretched buying the $1.5MM homes up and down my street. There is buying for value and there is buying for splash.
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Old 03-15-2013, 10:51 AM   #4
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Quote:
Originally Posted by Midpack View Post
No matter how many times I see the numbers, it never ceases to amaze me how varied home prices can be in the US. Hard to imagine my house would cost 3-4 times as much, or have to be 1/3rd-1/4th the size in another city. And these are medians, I know there are tony areas where price per sqft is in the 4 digits.

I watched two apparently late 30ish school teachers on House Hunters last week buying an $800K house without batting an eye. Beyond my imagination.

Simple things amuse simple minds (me).

The chart easily shows were the housing bubbles were....

I also am surprised how often people on these shows pay $600K for a 1400 sf bungaloo.... that is in terrible condition...
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Old 03-15-2013, 10:56 AM   #5
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I can't figure this either. Some of things on HouseHunters where they pay $600k+ for some fixer upper that I wouldn't give $100k for. Can't see having that much of net worth tied up in a house.
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Old 03-15-2013, 11:02 AM   #6
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I just cold my NY condo for over 1000/sq ft. Life is good!
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Old 03-15-2013, 11:33 AM   #7
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What I find interesting is the areas that have large discrepancies vs. very little to none, and the areas where the trend was (albeit just slightly) reversed.

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Originally Posted by timeasterday View Post
I want to be out west somewhere but I'm not spending a fortune on a house.
+1. I'm finding differences in some areas for the "same" house inside a retirement community vs. outside, and it can go either way.

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I know there are tony areas where price per sqft is in the 4 digits.
I'll bet those are likely not your typical frame construction on a "postage stamp" lot.

Tyro
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Old 03-15-2013, 11:57 AM   #8
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Factors that impact housing cost in a particular community:
quality of the public schools (even if you don't have kids it will impact resale)
availability of housing

Community income is generally correlated. I think wages are higher in Raleigh than Portland, for example. Cleveland is a weird housing market, many of their homes sell for less than replacement value.
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Old 03-15-2013, 12:32 PM   #9
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I just cold my NY condo for over 1000/sq ft. Life is good!
I'm expecting to get no more than $40/sqft for my condo in small-town Wisconsin. Life is Not so good.
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Old 03-15-2013, 01:12 PM   #10
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What was crazier was living in a house in a city on the right two thirds of the chart (<$100/sf) back in 2006, and thinking about those on the left third of the chart and how crazy they were back then.
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Old 03-15-2013, 01:14 PM   #11
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I'm expecting to get no more than $40/sqft for my condo in small-town Wisconsin. Life is Not so good.
For people in towns like yours, it is easier for a family or individual just starting out to buy a place of their own (and afford it) compared to a family starting out in metro California or NY or Boston, or DC. Higher salaries don't fully compensate for higher real estate values from my anecdotal observations.
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Old 03-15-2013, 01:16 PM   #12
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Assuming a ballpark selling price for my home/lot, then subtracting what the assessor says my lot is worth, I might get $70sf...
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Old 03-15-2013, 01:20 PM   #13
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Assuming a ballpark selling price for my home/lot, then subtracting what the assessor says my lot is worth, I might get $70sf...
I figure the chart in the OP's post doesn't subtract out the land value.

In my opinion you do it the right way, take out highly variable land value (location location location) to get structure value then figure out cost / sf. Using your method, I get $46/sf for my house. Definitely below replacement value even after adjusting for depreciation and some reasonable functional obsolescence fudge factor.

This has me itching to buy up all the available inventory of houses for sale in my neighborhood.
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Old 03-15-2013, 01:41 PM   #14
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I figure the chart in the OP's post doesn't subtract out the land value.

In my opinion you do it the right way, take out highly variable land value (location location location) to get structure value then figure out cost / sf. Using your method, I get $46/sf for my house. Definitely below replacement value even after adjusting for depreciation and some reasonable functional obsolescence fudge factor.

This has me itching to buy up all the available inventory of houses for sale in my neighborhood.
I am sure the chart did NOT subtract out land value as you suspect, and I assume a similar chart without land values would show less disparity (surely it's doesn't cost 4 times as much to build a given structure in San Francisco than here in flyover country).

But the all up cost is what people have to pay, and it just blows my mind when I see what some (relatively) young folks on HGTV & other shows are willing to pony up for a house. How on earth can two school teachers (husband and wife) even get a mortgage for $800K (there was no mention of a big downpayment, but maybe there was one)?
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Old 03-15-2013, 01:58 PM   #15
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Assuming a ballpark selling price for my home/lot, then subtracting what the assessor says my lot is worth, I might get $70sf...
These figures are put out by many realtor groups, zillow, Redfin, etc. Lot value is included; this is sales price not construction cost.

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Old 03-15-2013, 02:16 PM   #16
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These figures are put out by many realtor groups, zillow, Redfin, etc. Lot value is included; this is sales price not construction cost.

Ha
Yes, that was an exercise on my part to see how my house is valued, compared to replacement cost. FWIW, Zillow says my house/lot is worth $135k, or $82/SF.

You definitely could NOT buy my lot, and build a similar house, for that price. Maybe build the house for that, plus the lot...
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Old 03-15-2013, 02:38 PM   #17
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The last house I bought (don't own one now) I paid $69sf for it ('96), and sold it for $100sf ('08). Not a huge increase but not bad. That was in Bossier City, LA. The market is and has been pretty stable there for years, just a slow, steady increase...no bubbles. Same house is back on the market now, and I expect it will sell for around $120sf. I was the first owner. Since I used to be a realtor in that area, and am likely to retire there, I keep an eye on the market.
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Old 03-15-2013, 02:38 PM   #18
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I am sure the chart did NOT subtract out land value as you suspect, and I assume a similar chart without land values would show less disparity (surely it's doesn't cost 4 times as much to build a given structure in San Francisco than here in flyover country).

But the all up cost is what people have to pay, and it just blows my mind when I see what some (relatively) young folks on HGTV & other shows are willing to pony up for a house. How on earth can two school teachers (husband and wife) even get a mortgage for $800K (there was no mention of a big downpayment, but maybe there was one)?
How young were they? If they sold a house they owned for a decade or more in some place like New York or San Francisco they might have 800K in equity from the last house.
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Old 03-15-2013, 02:45 PM   #19
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The land is what appreciates...not the house. A house is similar to a car sitting on a lot, just much bigger and more expensive. A house does, and should, very slowly depreciate, but the land appreciation makes up for it and then some...usually. Don't make buying decisions based on subtracting out the land value.

You certainly don't see people jumping to buy run-down non-historical houses that are 80+ years old in areas where (the land) has not appreciated much. E.g., case in point, most of the actual city of Detroit. Some nice old houses that are sitting on a post-apocalyptic wasteland.
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Old 03-15-2013, 02:52 PM   #20
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These values ae hard to figure. I live exactly on the border between one zip, and my former zip. Condos where I live now cost maybe 60-70% of my old neighborhood, yet I could rent my place for as much or more than where I used to live, mainly because it is easier to reach big hospital employers and downtown either walking or public trans, and there is a good sized (25k+) university just down the street.

My old zip is the most expensive in the city of Seattle, though cheaper than a few elite spots east of Lake Washington.

Commuting is horrible from suburbs into Seattle, and you can only go 3 ways, south on I-5, north on I-5, and east across Lake Washington on one of two bridges, or prepare for long ride around the lake. If you live fairly close N or S, there are some heavily traveled arterials

It's an almost perfect example of a land constrained market, and when socio-economic constraints are added in it only gets tighter.

The east side (East of Lake Washington) is better in many ways, some public schools are good, crime in most areas in low, houses are newer and larger, and if you work over there, no bridge. But many younger people hate it, as compared to Seattle for many it is go-to-sleep boring.

I think there is a lot of emotion in real estate prices.

Ha
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