replacement value meaningless?

[davelj]

[quote=barnaby33]Russell, too many caveats. Sure its a great time to buy if X and Y and Z all happen to be true. Its just that for most of us, a recession means X, Y, Z aren’t.

While there may be many areas outside of SoCal that aren’t hit as badly by this recession, but whos house prices have returned to sanity, it hasn’t happened here on a grand scale.

Josh[/quote]

I guess it depends on how you define “grand scale.” As Rich has shown (and this has been noted in other media), housing affordability – generically – is as high as it’s ever been in SD. For most SFRs under $450K, it’s cheaper to own them than to rent them. (Yes, a good part of this is due to low interest rates which will certainly disappear one day.) That doesn’t mean the prices won’t continue to decline, but I think house prices – particularly at the mid- and lower-ends have mostly (“mostly” being the operative word) returned to sanity in SD. But that doesn’t mean they can’t over-correct and get even more sane.

[NotCranky]

[quote=barnaby33]Russell, too many caveats. Sure its a great time to buy if X and Y and Z all happen to be true. Its just that for most of us, a recession means X, Y, Z aren’t.

Josh[/quote]
I agree Josh, there are way too many caveats. However, there are caveats on both sides of the equation now. Anyway, I am not sure it is a great time to buy on average.Great in some circumstances,average in many and poor in plenty. We will have to wait for the experts looking in the rear view mirror to tell us when we are at the bottom, then it will be poor in plenty, great in some and average in many.

[NotCranky]

[quote=barnaby33]Russell, too many caveats. Sure its a great time to buy if X and Y and Z all happen to be true. Its just that for most of us, a recession means X, Y, Z aren’t.

Josh[/quote]
I agree Josh, there are way too many caveats. However, there are caveats on both sides of the equation now. Anyway, I am not sure it is a great time to buy on average.Great in some circumstances,average in many and poor in plenty. We will have to wait for the experts looking in the rear view mirror to tell us when we are at the bottom, then it will be poor in plenty, great in some and average in many.

[NotCranky]

[quote=barnaby33]Russell, too many caveats. Sure its a great time to buy if X and Y and Z all happen to be true. Its just that for most of us, a recession means X, Y, Z aren’t.

Josh[/quote]
I agree Josh, there are way too many caveats. However, there are caveats on both sides of the equation now. Anyway, I am not sure it is a great time to buy on average.Great in some circumstances,average in many and poor in plenty. We will have to wait for the experts looking in the rear view mirror to tell us when we are at the bottom, then it will be poor in plenty, great in some and average in many.

[NotCranky]

[quote=barnaby33]Russell, too many caveats. Sure its a great time to buy if X and Y and Z all happen to be true. Its just that for most of us, a recession means X, Y, Z aren’t.

Josh[/quote]
I agree Josh, there are way too many caveats. However, there are caveats on both sides of the equation now. Anyway, I am not sure it is a great time to buy on average.Great in some circumstances,average in many and poor in plenty. We will have to wait for the experts looking in the rear view mirror to tell us when we are at the bottom, then it will be poor in plenty, great in some and average in many.

[NotCranky]

[quote=barnaby33]Russell, too many caveats. Sure its a great time to buy if X and Y and Z all happen to be true. Its just that for most of us, a recession means X, Y, Z aren’t.

Josh[/quote]
I agree Josh, there are way too many caveats. However, there are caveats on both sides of the equation now. Anyway, I am not sure it is a great time to buy on average.Great in some circumstances,average in many and poor in plenty. We will have to wait for the experts looking in the rear view mirror to tell us when we are at the bottom, then it will be poor in plenty, great in some and average in many.

[sdduuuude]

The realtor in the OP doesn’t get it and will say whatever it takes to sell the house. The question isn’t “can you build it for that price?” The right question to ask is “can you get something comparable for that price – either by building it or by purchasing something else?” If the market for houses allows you to get something for much less than the replacement cost, it just means you should not spend the money to build. It doesn’t mean the house is a deal, as other houses could be even better deals. i.e. be sure to check comps.

There is some correlation between the replacement cost and the value of the house, and to some extent, the economics of the construction and housing markets do affect one another, but really for a given house, once built, the replacement cost is a sunk cost.

Lets take an example of two houses of the same size with the same number of bedrooms and bathrooms. One has a terrible layout, closed-off kitchen, isolated living rooms, hallways too large, rooms too small, etc. The other is properly designed with open kitchen. Same exact replacement cost. Differnt value.

[sdduuuude]

The realtor in the OP doesn’t get it and will say whatever it takes to sell the house. The question isn’t “can you build it for that price?” The right question to ask is “can you get something comparable for that price – either by building it or by purchasing something else?” If the market for houses allows you to get something for much less than the replacement cost, it just means you should not spend the money to build. It doesn’t mean the house is a deal, as other houses could be even better deals. i.e. be sure to check comps.

There is some correlation between the replacement cost and the value of the house, and to some extent, the economics of the construction and housing markets do affect one another, but really for a given house, once built, the replacement cost is a sunk cost.

Lets take an example of two houses of the same size with the same number of bedrooms and bathrooms. One has a terrible layout, closed-off kitchen, isolated living rooms, hallways too large, rooms too small, etc. The other is properly designed with open kitchen. Same exact replacement cost. Differnt value.

[sdduuuude]

The realtor in the OP doesn’t get it and will say whatever it takes to sell the house. The question isn’t “can you build it for that price?” The right question to ask is “can you get something comparable for that price – either by building it or by purchasing something else?” If the market for houses allows you to get something for much less than the replacement cost, it just means you should not spend the money to build. It doesn’t mean the house is a deal, as other houses could be even better deals. i.e. be sure to check comps.

There is some correlation between the replacement cost and the value of the house, and to some extent, the economics of the construction and housing markets do affect one another, but really for a given house, once built, the replacement cost is a sunk cost.

Lets take an example of two houses of the same size with the same number of bedrooms and bathrooms. One has a terrible layout, closed-off kitchen, isolated living rooms, hallways too large, rooms too small, etc. The other is properly designed with open kitchen. Same exact replacement cost. Differnt value.

[sdduuuude]

The realtor in the OP doesn’t get it and will say whatever it takes to sell the house. The question isn’t “can you build it for that price?” The right question to ask is “can you get something comparable for that price – either by building it or by purchasing something else?” If the market for houses allows you to get something for much less than the replacement cost, it just means you should not spend the money to build. It doesn’t mean the house is a deal, as other houses could be even better deals. i.e. be sure to check comps.

There is some correlation between the replacement cost and the value of the house, and to some extent, the economics of the construction and housing markets do affect one another, but really for a given house, once built, the replacement cost is a sunk cost.

Lets take an example of two houses of the same size with the same number of bedrooms and bathrooms. One has a terrible layout, closed-off kitchen, isolated living rooms, hallways too large, rooms too small, etc. The other is properly designed with open kitchen. Same exact replacement cost. Differnt value.

[sdduuuude]

The realtor in the OP doesn’t get it and will say whatever it takes to sell the house. The question isn’t “can you build it for that price?” The right question to ask is “can you get something comparable for that price – either by building it or by purchasing something else?” If the market for houses allows you to get something for much less than the replacement cost, it just means you should not spend the money to build. It doesn’t mean the house is a deal, as other houses could be even better deals. i.e. be sure to check comps.

There is some correlation between the replacement cost and the value of the house, and to some extent, the economics of the construction and housing markets do affect one another, but really for a given house, once built, the replacement cost is a sunk cost.

Lets take an example of two houses of the same size with the same number of bedrooms and bathrooms. One has a terrible layout, closed-off kitchen, isolated living rooms, hallways too large, rooms too small, etc. The other is properly designed with open kitchen. Same exact replacement cost. Differnt value.

[Author]

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