Excellent article in the latest D Magazine: Why Homes in the Exurbs Aren’t Built to Last (Does it make any sense to buy a disposable house?). The general thesis of the article is this – homes built way out in the “exurbs” are not built with quality and are not built to last. The author uses the pricing in several neighborhoods to support his value premise. He highlights the pricing in Craig Ranch, Swiss Avenue, and Hollywood Heights as example of how pricing has changed since 2008.
Overall, the thesis is spot on and is exactly why Classic Urban Homes builds in the neighborhoods we do. We build in infill locations in established neighborhoods. Sounds kind of like the author’s quote:
Perhaps we trade some of that excess space for durable, well-crafted houses located in complete neighborhoods.
I do have an issue with his methodology on pricing though. Using the tax assessor’s price to gauge the relative price appreciation or depreciation is hugely flawed. I fight the assessor’s office all the time on multiple properties we own, so I am intimately familiar with their tactics. Problems with the county offices are:
- They have no uniform pricing criteria. The price a neighborhood and then essentially force the individual property owners to come in and fight it. They are not assessing the value of each particular house.
- Sales prices are not publicly disclosed in Texas, so the appraisal district does not necessarily have correct sales prices. Although, when they do get a copy of a closing statement, they will usually use it. I have, though, seen examples of times when they say that you bought it too low, we’re going to price it higher.
- Since it’s up to the individual property owner to fight the appraisal pricing, you have to realize that not everyone will do so. Obviously lots of factors involved as to why, but, in the end, it means that the pricing for individual property is not accurate. As an average across the neighborhood, is probably reasonably close, but not for individual homes.
- The appraisal districts do not use standard appraisal guidelines like licensed appraisers do. Licensed appraisers use strict guidelines dictated by Fannie Mae that they have to follow. The district does not. They have their own methodology that they consistently refuse to share. I know, because I ask to see it every year!
If you want to truly gauge price changes in neighborhoods, you have to look at disclosed paired sales prices from MLS. In order to do this, you need a realtor who will pull numbers for you.
But, overall, I think his thesis is spot on. Cheaper tract homes in outlying areas will face a lot of pricing pressure for numerous reasons. 1) The next farmer’s field over will have newer homes in a matter of years, so the “older” homes will immediately be discounted. It’s like buying a new car and having it depreciate as soon as you drive off the lot. 2) Tract homes are built cheaply! In order to get to an “affordable” price point, they have to squeeze every nickel they can. 3) As energy and gas prices increase, people are going to want to be close in, not far away.
If you’re interested in a quality, infill home in an established neighborhood, look no further and give us a call!