San Diego Housing Bubble News and Analysis

The main factor that determines the value of a property is "location". For the most part, the values of the upgrades will be "erased".

Ok, maybe too many quotation marks. I just wanted to make sure it was understood that I don't consider such things investments, nor do I consider some of the trendy things of today are really upgrades at all.

Thanks for the advice though!

agree with gn, the upgrades are just bonuses to buyers and will not factor in significantly in negotiating price. However, they may give the home an edge against the competition without those features in terms of getting it sold.

I'm with Kev, it's an edge. It may not be the driving factor but it is a factor especially if there are comparable nearby homes listed. In a way it has a price factor because I have my minimums and anything lacking those, I back out the cost of those when determining the price. For instance, I hate honey oak cabinets and tile countertops with grout because I'm lazy and granite or corian is easy to clean. I also want stainless or at least new and higher end appliances (a quiet dishwasher with a built in disposal). I also hate carpet, laminate flooring, vinyl flooring, and glossy tile. Wood, tile or some other natural flooring or I will put it in before moving in and my offer will reflect my cost of doing so. Putting in flooring, counters or cabinets is a pain in the butt while you live there. So is there a value to places that are already "dialed in" and modern? YES. Will they get back every nickel they put into it? NO!! That is why I would prefer to buy the one that has the upgrades, because it's easier and cheaper to get it the way you want when there is so much out there to choose from and if a place lacks these things, they have to lower their price to compensate. It's like buying a car without air conditioning, right off the bat, you've lost half the potential clients and of those that are left, they will want a price reduction commensurate to the lack of air.

for me as well...granite countertops and stainless steel appliances are non-negotiable. Personally I think tile countertops look aweful and very dated, I don't like them at all.

During this runup the builders grossly exagerrated the costs of those upgrades and options in their pricing. As in, 300% or more in many cases. Regardless of the health of the market those massive premimums become almost invisible after about 5 years or so anyway. As a couple of you have noted they add to the marketability of the property more than the value upon resale.

how much should we adjust the price downward for missing features, i.e. how much does it cost to put these things in?

Granite countertops
Hardwood floors (assuming typical 1700sqft house)
stainless steel appliances

You know, I may be on the low end of the income scale for this community... and the age scale for that matter.

I have yet to clear 100k a year and am only 26. For me, I am more concerned with practicality... and will probably be equally concerned when I feel we are in the market trough. I already have a wife and newborn baby to support.

I just think that most crappy one/two bedroom condo conversions were going a little overboard with the premium construction.

I am glad to hear that you all seem to agree that I will not be forced to pay for luxury materials just because every REO has them.

Granite/Corian counters seem to get a lot of ridicule on these housing bubble forums - I'm not sure why. I just got done finding a new rental in Las Vegas, so here's my take on it from looking at a lot of mass-produced tract houses:

A five year old kitchen with granite counters and tile floor generally looks pretty good. Same age kitchen with tile counters and vinyl floor looks hideous. The grout is always nasty and moldy, the tiles become uneven from water seeping into the underlying chipboard, and it looks dated and cheap.

When I get ready to buy in 2008-2010, having a kitchen with current high-end materials and finish will be a must-have.

Don't get me wrong, I appreciate the finer things in life. Its just that there was a time when money WAS an object. It still is for me.

I think the use of high end materials was directly correlated with the fantom equity that made even a lowly condo owner feel rich. Without this equity in the marketlace I think the market would have developed lower priced alternatives to update ones home.

I just don't want to pay for anyone's irrational exuberance, neither for buying an inflated asset nor remodeling one.

As several other posters have commented, it's ALL about LOCATION, not upgrades, when it comes to pricing in prime locations. Some friends recently looked at some coastal properties that had fantastic locations, were almost in the category of "fixers," with no real upgrades, and even in this market, each property had three or four offers.

Upgrades seem to be what builders and sellers in less desirable locations offer to make the lack of location more attractive to potential buyers. Not really a deciding factor when it comes to those who wish to purchase real estate in a great location.

San Diego Native, what's better? A fixer shack in OB or a McMansion in Scripps?

The truth is that new upgraded houses are more roomy and comfortable to live in. I bet you'd rather drive an old BMW than a new Accord. But if you look at the sales figure, you know how the market has spoken.

Ideally, everyone would want an upgraded house in the most desirable neighborhood.

Not really a deciding factor when it comes to those who wish to purchase real estate in a great location.

It's not really a factor for me, because I know I can easily change it.  Personally, all I need is space in a good location.  

But I can understand why people who are not so real-estate centric would want all the upgrades so they can move in and focus on other aspects of their lives.