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when real estate appreciates, it is the value of the land that is going up much more than the value of the house. The building is getting older and might be worth less as it ages. One more reason to be very picky about location when you buy.
Quote:
Originally Posted by mkarch
Lot value. Houses depreciate as they age. Land appreciates generally.
Houses on cheap land scattered in the exurbs (and bad city neighborhoods), the low and slow rising land values have a measurable impact on ownership cost. Depreciation of the structure can keep people underwater for a long time, much like buying a new car.
Absolutely one of my favorite things about this forum is reading about how things work in other parts of the country. Around here, the majority of our housing stock would be considered quite old by national standards. After all, we were some of the first suburbs in the USA. As long as it's well kept, the structure doesn't depreciate here to the degree that it would in other areas because all the houses are old. In my hometown, you can't get new construction unless you have about $1.25M to spend. So, most people are buying homes that others around the country would consider old. We have a lot of homes from the 50's & 60's, some from the 80's, and some that are older from the early 1900's or even the 1800's.
I would agree that a large share of the value appreciation does come from the land. "Under all the land" as they say. I always advise people to focus first on location though. Around here, you're better off buying a 1/4 acre lot in a great location than you are a 1/2 acre in a questionable location. Also, yes these are typical lot sizes around here. The majority of lots are well less than 1 acre.
Certainly, the house is generally a depreciating asset. However, at some point it reaches an age where it starts to develop a rarity value. In my City, that's about 60 to 70 years old, but certainly by 75 years (circa 1930). Then both lot and house begin to appreciate in tandem.
My house value is about 60% lot and 40% structure.
[quote=MikePRU;28576770]Around here the land is almost always more valuable than the structure because close to Boston there hasn't been any undeveloped land available in quite some time.
In our area, this is also true. Our early '60's home sits on just under an acre. The land is worth much more than our structure.
When I was living in MA it was common for the home replacement value to be well less then 1/2 the total value. In one private home sale of $300K, the house could have been replaced with a new similar type house for $120K. In the more desireable towns, some were buying, knocking the old house down, and building new homes on the land.
My first SC purchase (had it built new) was $200K with the land valued at $20K.
If there is a structure on the property, you're better off
with a higher structure value because it is depreciable
and more liquid.
A highly valued, superior structure is also more easily
sold or rented. The only way to extract money out of land that
already has a structure on it is to sell the whole with
structure, or get approval for parcel sale, or rent the land
which will get you peanuts.
Land value is often discounted at sale when the structure is poor.
Land value is never discounted in a sale if the structure is superior,
it is often enhanced because the overall package is better.
Better structure = tax advantages, rental, sale advantages.
Now concerning what you have on the tax rolls it all depends
on zoning and local tax rates for the classification your land falls under.
Land can be your enemy or your friend depending on its zoning class.
Last edited by Snowball7; 03-09-2013 at 07:27 AM..
Around here the land is almost always more valuable than the structure because close to Boston there hasn't been any undeveloped land available in quite some time.
In our area, this is also true. Our early '60's home sits on just under an acre. The land is worth much more than our structure.
There's a small chance this home may need a new roof.
In our area, the land alone can sell for $400K to $800K.
Quote:
Originally Posted by accufitgolf
When I was living in MA it was common for the home replacement value to be well less then 1/2 the total value. In one private home sale of $300K, the house could have been replaced with a new similar type house for $120K. In the more desireable towns, some were buying, knocking the old house down, and building new homes on the land.
Teardowns are the norm here. There is no undeveloped land left. In Needham over the last 12 months we've had well over 100 but we tend to have more teardowns than other towns.
Quote:
Originally Posted by Snowball7
If there is a structure on the property, you're better off
with a higher structure value because it is depreciable
and more liquid.
A highly valued, superior structure is also more easily
sold or rented. The only way to extract money out of land that
already has a structure on it is to sell the whole with
structure, or get approval for parcel sale, or rent the land
which will get you peanuts.
Land value is often discounted at sale when the structure is poor.
Land value is never discounted in a sale if the structure is superior,
it is often enhanced because the overall package is better.
Better structure = tax advantages, rental, sale advantages.
Now concerning what you have on the tax rolls it all depends
on zoning and local tax rates for the classification your land falls under.
Land can be your enemy or your friend depending on its zoning class.
I hesitate to use words like never and always when talking about real estate especially on a national discussion forum. Much of what you say would not be true in these parts.
There's a small chance this home may need a new roof.
It looks to me that the old house is just ahead of its time--it has one of those newly-popular "green" roofs.
Ford Motor Company installed a green roof on part of the Rouge Plant at a cost of several hundred thousand dollars. It seems that the homeowner just found a way to accomplish the same thing without the added expense.
There's a small chance this home may need a new roof.
In our area, the land alone can sell for $400K to $800K.
Oh, I know that is true! We moved to NJ from Mississippi, had a bit of a sticker shock even though we thought we were prepared. Then we had the chance to move to the Boston area, just loved Needham but our hearts were just too weak from the initial move
It would be interesting to see a comparison by major city of lot value as a percent of total value for various price ranges. I wonder what this comparison might show us? It would be interesting to see this data in absolute term and as $/sf of living area. I suspect states like Texas with lower housing cost might also have smaller lots than other major cities on the coasts at least. So my question is land and home cost more influenced on the coast by gov regulation or more market forces? If regulation drives the cost to a great degree on the coasts then isnt a policy decision to have higher home and property values?
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