Author: TheArcadian
June 26, 2008
So what does it take to sell a home in today’s market? I am regularly challenged by associates who say $350-400 per square feet is “normal” for a home in Arcadia. They can’t imagine anything selling for under $300/sf. I don’t blame them since a quick search on Redfin and NeighborCity will reveal that very few homes are priced for under that figure.
Of course, we all know that home values are not determined by listing prices. It is based on actual sales data. Duh! Take for example the following property we profiled 2 months ago:
Purchase price: $1,500,000 ($354/sf)
Asking price: $1,169,000 ($277/sf)
Sales price: $1,041,000 ($246/sf)
1233 S 6th Ave
Arcadia, CA 91006
- Beds: 4
- Baths: 3.5
- Sq. Ft.: 4,227
- Built: 1989
Sales price: $1,041,000 ($246/sf)
When REOs like these set a new low in terms of price per sq. ft., it will directly affect its neighbors and surrounding communities. Purchased in 2005 for $1,500,000, it took only 3 years to wipe out $500k in equity; of which $300k was the buyer’s down payment!
Send this post to all your skeptical friends, family and coworkers who argue that the “award winning” Arcadia School Disitrict is enough to prop up home prices. Although price per square footage isn’t the best way to value a home, it gives us a quick and dirty reference as to where home sales are heading (especially during bubble cycles).
As of right now, anything decent for under $300/sf is getting snapped up very quickly but I fully expect us to see more high-$200/sf listings after this Summer/Fall season. Do I sound crazy?
I called the agent as soon as I saw this property featured on your blog. The agent did not return my calls until a week later, only to tell me that the property has been sold. The median home price in Arcadia is still falling, but the speed at which this property had moved off the market also shows: (1) demand for housing in Arcadia is still very high and (2) there are still plenty of qualified buyers waiting on the sidelines. These factors will keep Arcadia prices high for sometime to come until other factors come into play like the early 90′s-e.g. massive layoffs of high paying workers-which has not happened yet in SoCal despite all the gloom and doom news.
Homes in Arcadia will sell if they are priced correctly. Apparently, this one was at $246/sf.
I have seen this listing before. It’s a crappy 2 houses on a lot sort of deal. This house is actually the backhouse. To get to the lot, you need to drive down a narrow driveway. Check out the area view on redfin.
The house seems “nice”, but technically there’s no curb appeal at all. This would partly explain the rather low $$/sqft. Also, it’s a rather large house. Large houses tend to have lower $$/sqft.
Yea, for $1MM you get the luxury of living behind someone. Hah.
Larger homes “should” have lower $/sqft but if you look at Arcadia, the majority of ~4,000sf homes are currently listing between $350-430 per sq. ft. So price it down to under $300 and it will sell.
This is quite a deal. Most people I talk to seem to think $200-$250 per square foot is what new construction/replacement value is. What does this price say about the land value? What is your take on replacement cost?
Kerin,
Custom homes can very well cost up to $250+/sf to build. From what I understand, it entirely depends on the materials used. I think a large home that skips on the marble, excessive use of granite, high-end fixtures and exotic landscaping can be built starting at $150/sf.
I hear from contractors that their labor costs have been dropping due to lower demand. This also plays a significant part in replacement cost.
As you alluded to, land plays a large role in the valuation of real estate. Of course, all that went out the window during our housing bubble. But as you probably know, property is appraised using 4 methods:
Home Sales Comparison
Land Sales Comparison
Cost Approach (replacement cost)
Income Approach (for multi-family & other commercial RE)
Assuming you have plenty of current data, these 3-4 steps will give you the most accurate “market value” of any property. Since I run these types of numbers all day at work, I guess it’s time to write a post about it instead of a long comment.
I have seen this listing before. It’s a crappy 2 houses on a lot sort of deal. This house is actually the backhouse. To get to the lot, you need to drive down a narrow driveway. Check out the area view on redfin.
The house seems “nice”, but technically there’s no curb appeal at all. This would partly explain the rather low $$/sqft. Also, it’s a rather large house. Large houses tend to have lower $$/sqft.(2)
This is quite a deal. Most people I talk to seem to think $200-$250 per square foot is what new construction/replacement value is. What does this price say about the land value? What is your take on replacement cost?(3)