Are the more expensive homes in the Triangle a bad investment? (Cary: sales, home equity)
Raleigh, Durham, Chapel Hill, CaryThe Triangle Area
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I saw this article, and wondered if the same is happening to homes that are 3-4x the average sales price in the Triangle? I suspect only Realtors would have precise answers, but perhaps someone else has seen an article with local data around this or could point me to a source?
Considering Causation and Correlation is always an interesting diversion.
Are higher priced homes losing value, or is the lower end benefiting from support at a bedrock level?
I think it is much of the latter.
The rapid increase in entry-level pricing gnaws away at the averages' relative ratios.
With homes in the lower quartile of pricing zooming in value, they can create the 3.15X ratio just if the high end holds prices.
Fewer multi-million dollar homes being built?
Of course, it is a limited market and people with the wherewithal to spend that much often want to invest in something that meets their fondest desires.
Protect your investment?
"Location. Location. Location."
A guy is building a significantly expensive house on Preston Golf Course. $1,000,000 building lot! In the 100-year flood plain.
His foundation was well under water in Hurricane Matthew.
Location? Great view. It may not be worth it if he needs to sell at some point.
Considering Causation and Correlation is always an interesting diversion.
Are higher priced homes losing value, or is the lower end benefiting from support at a bedrock level?
I think it is much of the latter.
The rapid increase in entry-level pricing gnaws away at the averages' relative ratios.
With homes in the lower quartile of pricing zooming in value, they can create the 3.15X ratio just if the high end holds prices.
Fewer multi-million dollar homes being built?
Of course, it is a limited market and people with the wherewithal to spend that much often want to invest in something that meets their fondest desires.
Protect your investment?
"Location. Location. Location."
A guy is building a significantly expensive house on Preston Golf Course. $1,000,000 building lot! In the 100-year flood plain.
His foundation was well under water in Hurricane Matthew.
Location? Great view. It may not be worth it if he needs to sell at some point.
I suppose the graph reflects diminished return on investment that applies to most luxury vs their more essential counterparts. It's not just homes. Luxury cars depreciate faster than mainstream models. Previously owned, custom-tailored clothing fetches less on Ebay (certainly as a percentage of original sales price) than chain-store bought clothing in standard sizing.
However, local trends may reflect this pattern to varying degrees (or even defy the pattern in certain cycles), which is why I wondered if local Triangle sales trends at the high end reflect the data in the graph?
From a strictly financial view, it is best to look at a house as a place to live and not as an investment. There are many articles on the 'net that go into the details on why that is.
I suppose the graph reflects diminished return on investment that applies to most luxury vs their more essential counterparts. It's not just homes. Luxury cars depreciate faster than mainstream models. Previously owned, custom-tailored clothing fetches less on Ebay (certainly as a percentage of original sales price) than chain-store bought clothing in standard sizing.
However, local trends may reflect this pattern to varying degrees (or even defy the pattern in certain cycles), which is why I wondered if local Triangle sales trends at the high end reflect the data in the graph?
But, the link from Advameg does not indicate ROI or pricing changes. Only a change in the price ratios.
I don't see a lower luxury price dynamic presented.
I see a presentation that compares higher entry level pricing to average luxury pricing.
IF median price in Cary was $280,000 10 years ago, and average luxury homes traded at average $1.4 million, that was 5:1.
IF the median price in Cary today is $350,000 and average luxury homes trade at average of $1.4 million, we now have a 4:1, without any reduced pricing on the high end.
From a strictly financial view, it is best to look at a house as a place to live and not as an investment. There are many articles on the 'net that go into the details on why that is.
But, most buyers' end game is not to be carried out with their boots on.
Most buyers MUST consider resale price potential, particularly if borrowing money.
So, it may not be an "Investment," but we have to recognize the potential "Return On Investment."
From a strictly financial view, it is best to look at a house as a place to live and not as an investment. There are many articles on the 'net that go into the details on why that is.
I agree that home equity (which is a component of net worth) is not the best basket an investment-minded person to place all their eggs, relative to other investment opportunities. But unlike a luxury car or a similar expenditure, it is still an investment in the sense that we are foolish to not buy with appreciation and ROI in mind, particularly considering the overall size of the purchase.
But, the link from Advameg does not indicate ROI or pricing changes. Only a change in the price ratios.
I don't see a lower luxury price dynamic presented.
I see a presentation that compares higher entry level pricing to average luxury pricing.
IF median price in Cary was $280,000 10 years ago, and average luxury homes traded at average $1.4 million, that was 5:1.
IF the median price in Cary today is $350,000 and average luxury homes trade at average of $1.4 million, we now have a 4:1, without any reduced pricing on the high end.
I felt the quartile divisions in the graph were adequate to illustrate the point of the article, but admittedly it might have been useful and interesting to see a few more lines. Some may say that in this case, the line between lower luxury and premium average is blurry and they would be pretty close, meeting around the 275% range on that graph. Also, I think it would be reasonable to assume that the curves in the line at that level would likely represent a happy medium between the lines starting at 200% and the one starting around 350%.
I felt the quartile divisions in the graph were adequate to illustrate the point of the article, but admittedly it might have been useful and interesting to see a few more lines. Some may say that in this case, the line between lower luxury and premium average is blurry and they would be pretty close, meeting around the 275% range on that graph. Also, I think it would be reasonable to assume that the curves in the line at that level would likely represent a happy medium between the lines starting at 200% and the one starting around 350%.
Generally, I would agree that a $300,000 house a few years ago was a better investment than a $1,000,000+ house, IMO.
Just a bedrock floor price and value support and a greater pool of buyers for resale.
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