prices are really inflated

[BikeRider]

I read this comment on the housing bubble blog. Interesting comment from a builder. Something I have been saying to myself for a while….. what makes a home that sold originally for $700K worth $1,000,000? The builder is saying that he’s building current million dollar homes and they aren’t homes that have just had their value driven up to rediculous levels because of buyers bidding prices up like fools (my words).

“‘A million-dollar home doesn’t have to be a $700,000 home that’s now priced at $1 million just because the market says so,’ Lewis Birnbaum, division president of Centex Homes said. ‘There’s a lot of homes on the market whose prices are really inflated.’”

You have to read the whole article here I guess to get the context-
http://thehousingbubbleblog.com/

Under-
“Slowdown More Intense Than Anticipated”: Florida

I guess I get all caught up in the prices because I know how to build a home, though I am not a builder. I worked as a carpenter’s helper for a few years while in high school and just out of high school. Then took drafting in college and so have a good handle on building. I’ve helped build a few homes and also built two garages for myself. I also know the cost of building materials. I built my own garage and it cost me a third of what a builder would have charged. There is a mark up in materials and the labor is insane. So I look at a home and know what it really cost to build it. Then I see what an old house sells for and it blows my mind. Plus, I don’t understand why people buy an old home, when for the same price they could have a new home. I guess location plays into it for the most part when buying old verses new.

[carlislematthew]

Plus, I don’t understand why people buy an old home, when for the same price they could have a new home. I guess location plays into it for the most part when buying old verses new.

Yes, I think location plays a large part. But for me, a larger part is related to the size of the lot and how close I am to my neighbors. In my last house (up in WA) I had .75 acres and could hardly see my neighbors. The house was built in the 70s. All the new houses in that same area are all built in new developments and they’re right up next to each other, with minimal trees (or space for them). Oh yeah, and they all look the same.

If I’m sitting out on my deck talking with my wife or friends, I don’t want the people next door to hear my conversation. It almost makes me feel claustrophobic.

If I could get a new home, in a good area, with a larger lot, then I’d buy it. Only a tear-down is going to give me that…

[(former)FormerSanDiegan]

I don’t understand why people would pay to buy new construction, stepford wives cookie-cutters crammed together with no side yards, HOA fees and requiring a letter from their lawyer if they want to change the color of their house in areas with high traffic and long commutes when they can have a slightly smaller house in an established neighborhood that has some charm. But hey that’s just me.

P.S. – In SD the (retail) price of the land sitting under a house is about 50% to 90% of the overall price.

[taz]

I believe the older homes are better constructed, and also have features you generally don’t get in new homes like individuality, charm, stained glass windows, batchelder tile fireplaces, etc.

[Daniel]

In SD, the price of land is next to zero if you can’t get a permit to build a house on it, and it is huge if you are allowed to build. Cars would cost a lot, too, if GM and Toyota had to ask everyone else already owning a car if they could produce one more, and had to wait for five years to get the “car building permit”.

[BikeRider]

Well, the wife and I built new on five acres, so we have some buffer from neighbors, but the home was new when we moved in. Older homes can be better, or much worse, according to when built, what building codes were in force, how many termites have moved in, etc, etc. An old home does have charm, but someone like me, that knows what can be wrong or go wrong, I opt for new. I don’t want to spend my time fixing the old warn out stuff just for having charm. Old homes on the east coast typically mean old wiring, narrow rooms (no A/C back then, so rooms were narrow for good cross winds through windows), possible termite damage…many things. Of course a good home inspection can bring out most problems and sale price can be adjusted. I guess when I think old, I’m thinking real old. I would definitely not consider a home built in the 40’s, 50’s or 60’s. I think the building quality would be questionable. I’d have to research more on that age home for what building codes were in force and how well they were inforced. If the home is on a well, copper pipe can get eaten up by the minerals in the water. I’ve seen whole copper piping systems in a home start to get pin hole leaks behind walls, requiring everything to be ripped out and re-piped….walls repaired. These flippers that go in, replace the appliances, paint the walls….they sell you a really pretty home and you wonder, what’s under the hood?

[Doofrat]

Snippet from Warren talking about the housing bubble in May of 2005.

Buffett: “I recently sold a house in Laguna for $3.5 million. It was on about 2,000 square feet of land, maybe a twentieth of an acre, and the house might cost about $500,000 if you wanted to replace it. So the land sold for something like $60 million an acre.”

http://money.cnn.com/2005/05/01/news/fortune500/buffett_talks/

[PerryChase]

I agree with BikeRider. Old can be really bad. As much as I’d like to live a Central San Diego, the houses that I’ve seen really need some major updating. I don’t mind buying an old house if it’s discounted enough for me to afford to do a major remodel. No HOA or Mello Roos help finance the remodel.

New houses generally use better technology. I can tell the difference between a house built in the 1980s and one built in the 1990s. The joists are better in the 1990s house and you don’t hear the floor creaking. New houses are also better insulated, have better windows and require less heating and cooling.

Old houses are well-build only if they were large houses built for the well-to-do. Old tract houses from the 1950s-1980s are bad. 1990s onwards is better.

[Author]

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