Welcome back, docteur. I fractured my leg/hip from running, so the pain and the summer school for the kids is keeping me home more than ever. I had looked foward to a nice vacation, but it won’t happen this summer.
Daniel, you are right. My 5.3 acres in rural Poway were worth $350K last summer, because only one house could be built on it. If the zoning were changed to 1 house/acre, that land would have multiplied in value. Real estate researchers, such as John Talbott, found the same result as you did, in studies of land value.
docteur, the high cost of housing is due to the high cost of land. The high cost of labor/materials is due to the short supply during the construction boom. As this cools, both will fall in price. Even the commodities boom will fizzle out once consumer demand slows down. By next year, I bet copper will be back at before-runup prices. The material costs were artificially high due to the overconsumption. If housing can or cannot go below replacement cost, depends on how much the builder overpaid for the land. Could Lucent stock go below what someone paid for it a year before? An interesting thing about bubbles: they correct to baseline, so any overpricing will be corrected on the way down. As long as you are comfortable with the possibility of your house being worth $1 mil, who cares? You said you are a millionaire, and you love your house, so why do you care if it loses value? Someone in your situation has nothing to be worried about, except the possible loss of the cash that you stashed away (dollar falling, etc.)
sdrealtor, a rule of thumb in construction is that one should spend no more than 1/3 of the total price on the land. Builders who owned their lots for many years, are earning a huge premium on their homes just on the lot value.
