Sarah Jarvis Team at One South Realty

at One South Realty

Market Values

Price per Square Foot | A Critique

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sfThe most important thing to remember about price per foot is that it is not linear.

The next most important thing to remember about price per foot is that it is not linear.

What do I mean?

Just because a 3,000 SF house is worth $400,000 does not make a 6,000 SF house worth $800,000 or a 30 SF house worth $4,000.

So often, people get hung up on price per foot as the absolute gospel when it comes to house valuations.  Price per foot, while a tool that can be very insightful when applied correctly, tends to act as a point of contention to ‘price per footists’ when the price for a home exceeds the price per foot within a neighborhood.  For whatever reason, a price per foot average within a neighborhood tends to drive decisions far more often that it should.

Here are things to take into account:

  • For price per foot to be at its most effective, lot prices, finishes, age, materials and other features (garage sizes, basements) must be very similar.  Examining homes in the same suburban neighborhood with similar features will be a good use of $/SF.  Using it to compare a brick ranch built in 1957 to a colonial built in 1987 is not the right use.
  • Comparing a home with a finished 3rd floor or basement against a home with unfinished areas is wrong.
  • Comparing home built prior to 1940 or so is really not a good idea as time has really eroded the accuracy of the measurement.
  • Using $/SF to compare different builders is also an issue.  Buying a home built by Ryan because it is cheaper by $10/SF than Boone is a very flawed decision.

I like to use $/SF as tool in the following manner:

  • $/SF can be used to establish neighborhood minimums and maximums.  This needs to be looked at in companion with aggregate sales prices in the neighborhood.  In other words, if a neighborhood has a average $/SF of $160 but a maximum price of $300,000, then be careful of a home that is 2,000 SF priced at $360,000.
  • $/SF works really well in new construction within the same neighborhood.
  • $/SF is a helpful tool in renovation or addition properties.  It can help the decision process greatly.
  • $/SF is helpful when it benefits you and a pain when it does not.  I use it to defend appraisals and listing prices or to argue down pricing for my buyer clients.

When the dust settles, using $/SF to make a decision is a bad idea.  When it is one part of an overall analysis, then it can be powerful.

EarthCraft Homes in Richmond

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ecvaAs a group that loves new houses, we especially love the ones that are built to a higher standard.  EarthCraft of Virginia sees to it that more and more homes are built to standards that far exceed the ones demanded by the counties.

While the benefits of buying a home certified by EarthCraft are far too numerous to be listed here, they generally break down along the lines of better air quailty, responsible materials and better energy signatures.  For a relatively small investment (which is paid back quickly in energy savings), a home can be built in such a way that it will not just provide shelter, but improve your health and pocketbook.

We like EarthCraft.

[ read more ]

RVA Affordability and Taxes

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In this video I discuss the prices and local tax rates you should expect to find for typical suburban housing (e.g., 4-bedroom, 2.5-bath, 2 car garage) in the Richmond Virginia area including the surrounding counties.

What The New Home Market Looks Like

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00_Scots_LandingAs a Real Estate lifer, sometimes it is hard to turn off my need to know what is going on. I think people in every industry are that way…real estate, information technology, automobile…it doesn’t matter. When you are not working, you are still thinking and when you are bumping around on a random weekend with no particular agenda, you may sneak in a little market intel.

I was that guy on Sunday.

While killing time with one of my daughters (who I secretly hope will be an architect, so I am grooming her), I couldn’t help but to stop in several new subdivisions and check out some of the 2011 Parade of Homes entrants. I didn’t get to go out during the official 2011 Parade of Homes weekends so I decided this past weekend was the time. What I saw was very encouraging.

There has been a lot of change in the industry and I am finding that the changes were as I had hoped…builders have begun to build a nicer, but smarter, home. I saw ‘GREEN’ elements in almost all of them. Every single builder had incorporated some element of responsible design, from fully Earth Craft certified to simply doing a MUCH better job of blowing in insulation. I saw smaller footprints and finer finishes and in many cases, a noticeable LACK of pretentiousness.

It was refreshing.

I saw a much higher level of design diversity within the neighborhoods, too. The shapes and sizes and fronts and materials were all QUITE different from house to house. It appears (at least for the time being) that the days of the subdivision where you got to choose from either white, off white or beige vinyl on the exterior are gone. I saw brick, Hardiplank, stone and cedar. I saw Craftsman, Colonial, Tudor and Contemporary influences on the exterior. I saw designs that were narrow and deeper to create a better sense of space between houses.

I also saw a lot of SOLD signs and that is something that was really good to see.

Buying for the Student – The VCU Housing Options

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VCU housing
The TriBeCa Brownstones were built on land close to VCU and many were purchased by a parent for their child as a dorm alternative.

The Best VCU Housing Option – Buying a ‘Dorm’

I would like to offer the following debate to the parents of VCU students and their Medical School counterparts who are coming to Richmond this summer (or who have already arrived) and who need to make a decision about VCU Housing…

You should buy a house or condo.

Now I understand that my position on this is not without bias. I am a Realtor who sells a lot of property in and around both the VCU Campus and the MCV/VCU Health Systems Campus. It benefits me when you buy. It does not really benefit me when you rent. I am now done disclaiming my conflict of interest.

That being said, it does not mean that I am wrong about what is the most prudent decision regarding VCU housing options.

I am not going to give you the rent vs. buy calculator argument because we (Realtors) can all tweak the numbers until we can get it to show what we want it to. Depending on inflation, appreciation and tax effects, I can get one of those things to spew out some amazing numbers. Those are interesting tools and they have their place. This is not a debate for the rent vs. buy calculator.

My argument is more macro in nature and relates to the following set of circumstances:

  • Prices are down 20-30% depending on your market and asset type
  • Interest rates are being held down (somewhat artificially) by the Fed and are still hovering around 5%.
  • College tuition and college room and board is going up despite the rest of the economic world moving the other direction.

Renting a property for roughly $1.30 per SF per month (which translates to about $1,200-1,400/mo for the typical 2-bedroom apartment in City of Richmond in or around the VCU campus) or buying a property for about $190-210 per square foot yields about the same monthly cash payment at the end of the day.

Which one gives you some upside? It is pretty obvious that buying has the promise of upside.

I know that the counter argument is simply that many are not sure that the pricing declines behind us.

The facts are as follows:

  • On January 1 2009 there were over 400 condos for sale in Richmond, VA
  • On January 1 2010 there were less than 200 condos for sale in Richmond, VA
  • On January 1 2011 there were still roughly 200 condos on the market in Richmond, VA.
  • No new projects have come to the market since the adjustment in 2008.
  • Inventory in 2013 has been somewhat constant hovering around 100-130 units on the market at any one time

Life, at least financial life is about managing/pricing/understanding risk. Betting large sums of money on risky endeavors with no upside is not smart. Betting medium sums of money with a low cost-of-capital in a market that has balanced itself with no competition coming on line sounds like a pretty decent bet to me.

Don’t let the national media scare you off. While extremism and negativity sells, I have yet to see report on the college-driven housing market on 60 Minutes. As a matter of a fact, the student housing market is one of the healthiest housing sectors in the market and owning a home that is underpinned by a rental option to students is a way to remove a great deal of risk from the equation.

If really do have a VCU housing decision in your future, lets discuss the options.

804.201.9683

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