Monday, July 30, 2007

A lot is a lot is a lot ...

From the Wall Street Journal ...

The McMansion Effect
The Cullens' Neighborhood Is Super-Sizing,
So What Does It Mean for Terri's Home?
July 26, 2007

Our neighborhood is changing. A number of homes are undergoing major renovations that will double their sizes, and new homes are being built that are much larger than existing homes in the community. Our three-bedroom, one-and-a-half bath, 2,400-sq.-ft. home, once among the largest in the neighborhood, will soon be among the smallest.

The building boom has given Gerry and me pause. What impact is the sudden McMansioning of our neighborhood going to have on the value of our home? And will the super-sizing of nearby homes have any affect on our neighborhood's culture? Is it cause for concern, or are we just jealous? ...

Good to read a dialogue about the changes that have taken place in the assumptions about real estate.

For example, this was the guiding principal for real estate in thru the end of the 90's. As Cullen states, "When shopping for homes, the general rule of thumb is to avoid buying the largest home in the neighborhood. A home that's much bigger than other homes in the neighborhood will typically sell for less than if that same home were in a neighborhood with equally large homes. Why? Recent home sales help determine the fair-market value of your home. If no comparably large homes have been sold in your area, it may be difficult to convince home buyers that the larger home is worth considerably more than recent sales of smaller homes in the neighborhood."

Continuing, "On the other hand, having a medium-sized house in a neighborhood with much larger homes can boost its resale value. So in a situation like ours, where larger, more expensive homes are now more common than our home, my neighbors' home renovations should help to improve our home's value. Adding to its value is our lot size -- with an acre of land there's plenty of room for a home-buyer to add on to the home."

Ah ha, now I beg to differ. According to the City of Raleigh property valuation formulas, a lot is a lot. Current ITB real estate research shows lots valued at $100K on the Wake County Property Tax site. The new tax valuations will be $200-300K for the same lot, neighborhood depending. If you look around the site, you will notice a .25 acre lot is the same value as a .60 acre lot.

What gives?

Is this driving the land rush? In the above example, if this was in my neighborhood, that house is a goner. Either that lot will be bought and sold again as multiple lots, each for the current per-lot valuation, or that house will be replaced by something more "fitting" for such a large parcel. And fitting, nowadays, means FITTING. As in, the lot provides a small border of land (called required setback) around as big a house as can be fit within its bounds.

As a general rule, these homes have little connection to the surroundings. They are like islands in the midst of their chosen neighborhoods (translation: location location).

So, yes Terri, your value will rise with the changes in the neighborhood, you can verify this in your property taxes, but if you pay attention you will observe that your house will lose value, mansion by mansion.

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