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> Ben and Valentina Bethell spent about $3.5 million in 2009 [..]. The couple listed the home in 2015 for $4.495 million, and have since reduced the price to $3

by nikanj 8y ago

> Ben and Valentina Bethell spent about $3.5 million in 2009 [..]. The couple listed the home in 2015 for $4.495 million, and have since reduced the price to $3.995 million. It's somewhat insane that houses are automatically assumed to appreciate. They have lived in the house for a decade, and it's no longer brand new. Why should the purchase price now be half a million more than the construction costs were?

maehwasu 8y ago
You’re mostly correct in this case, but for more commoditized houses or complexes, that can generate income, the reasoning is as follows: There’s always significant uncertainty in construction: timelines, permits, cost overruns, contractor vetting, etc. In addition, two years you spend building are two years of rents that you don’t collect. As a result, there’s usually a premium, sometimes a significant one, for having something already built. The amount of the premium varies depending on how those factors interrelate in a given market, and of course speculative appetite in that market also comes into play.
- europsucks 8y ago
  Unfortunately, there is also a lot of uncertainty in buying a "used" home. There can also be issues the seller doesn't tell you about.
ApolloFortyNine 8y ago
Unless someone is going out of their way to buy a brand new home, nobody cares about the age. You have the home inspected, and if the roof is good (replaced recentlyish) and there's no structural damage, your good to go. It's not like depreciation on a used car. A house is a house. Hell, lots of times newer homes are more shoddily built then older ones.
- saiya-jin 8y ago
  There are things which survive centuries like walls, and then stuff that slowly disintegrates and is a proper nightmare to change/replace - plumbing, electric wiring, general room layout with those thick structural walls, size/layout of windows etc. I can guarantee you that electric wiring from 1970 is something different than that from 2010 (personal experience, sockets slowly failing). Old apartment/house is definitely an additional maintenance cost and possibly tons of other inconveniences, and should be priced accordingly.
lotsofpulp 8y ago
Because location is not fungible. Desirable places to live stay desirable many times because high income people compete with each other to live there, hence when incomes go up, so do the prices they’re willing to pay. The good schools with all the children of educated parents are there, as are the facilities, stores, restaurants, airports, mass transit, weather, parks, etc. The supply of places with a combination of all of those things is very limited compared to demand. Places that don’t have many high income people competing don’t see this kind of appreciation.

by nikanj 8y ago

maehwasu 8y ago

You’re mostly correct in this case, but for more commoditized houses or complexes, that can generate income, the reasoning is as follows: There’s always significant uncertainty in construction: timelines, permits, cost overruns, contractor vetting, etc. In addition, two years you spend building are two years of rents that you don’t collect. As a result, there’s usually a premium, sometimes a significant one, for having something already built. The amount of the premium varies depending on how those factors interrelate in a given market, and of course speculative appetite in that market also comes into play.

europsucks 8y ago
Unfortunately, there is also a lot of uncertainty in buying a "used" home. There can also be issues the seller doesn't tell you about.

ApolloFortyNine 8y ago

Unless someone is going out of their way to buy a brand new home, nobody cares about the age. You have the home inspected, and if the roof is good (replaced recentlyish) and there's no structural damage, your good to go. It's not like depreciation on a used car. A house is a house. Hell, lots of times newer homes are more shoddily built then older ones.

saiya-jin 8y ago
There are things which survive centuries like walls, and then stuff that slowly disintegrates and is a proper nightmare to change/replace - plumbing, electric wiring, general room layout with those thick structural walls, size/layout of windows etc. I can guarantee you that electric wiring from 1970 is something different than that from 2010 (personal experience, sockets slowly failing). Old apartment/house is definitely an additional maintenance cost and possibly tons of other inconveniences, and should be priced accordingly.

lotsofpulp 8y ago

Because location is not fungible. Desirable places to live stay desirable many times because high income people compete with each other to live there, hence when incomes go up, so do the prices they’re willing to pay. The good schools with all the children of educated parents are there, as are the facilities, stores, restaurants, airports, mass transit, weather, parks, etc. The supply of places with a combination of all of those things is very limited compared to demand. Places that don’t have many high income people competing don’t see this kind of appreciation.