Washington Post.com | Chat Plus
Sunday, August 12, 2007; Page F05
Real estate editor Maryann Haggerty and columnist Elizabeth Razzi respond to a question submitted in a recent online chat.
Q | Arlington: What are your thoughts on tear-downs in the area? It seems that builders are paying $700,000 for a house to tear down and are building houses that sell for $1.2 million. Do you feel there is adequate value in these homes? For example, more space and fewer problems with a new home vs. a 60-year-old home?
A | Maryann Haggerty: Tear-downs were one of the most controversial manifestations of the housing boom; many people hate the way they change the feel of older neighborhoods. I'm sure they have slowed down along with the rest of sales, but I know they continue in some places. No one is making any more land in close-in neighborhoods, and the builder wasn't paying $700,000 for the house. He was paying that for the land.
Q | There used to be an informal rule that, to preserve your investment, you should never own the most expensive house on a block. Is that still the case?
A | Elizabeth Razzi: Some in-fill houses, built in place of tear-downs, fit beautifully with their neighborhoods. Others are so oversized or hideous that you can only feel for the neighbors who have to look at them. And I've seen several in-fill homes languish on the market because they cost twice as much as surrounding houses. Few people spending $1 million on a new house really want to live in a $500,000 neighborhood. But if several of those million-dollar homes go up, buyers come to see it as a more-expensive address, and later tear-downs become less risky.
New homes offer more space and fashionable amenities, but they don't necessarily have fewer problems. If older houses have been maintained well and updated periodically, they can give less trouble than a new, untested house. But without regular maintenance and updating, houses and even neighborhoods grow shabby and obsolete, and a round of thoughtfully designed, well-built infill construction and rehabs can be an improvement. ...
Few people spending $1 million on a new house really want to live in a $500,000 neighborhood. But if several of those million-dollar homes go up, buyers come to see it as a more-expensive address, and later tear-downs become less risky.
Translation: tear-downs less risky means preserving existing homes more risky.