"We're not convinced the price-per-square foot comps out to other sales in the neighborhood," the text said, "but we know that comps are usually hard to parse, and often bear no relationship to what the market will bear."
Thank you, I couldn't have said it better myself.
If price-per-square foot was all that was required to sell a home, Realtors would have gone the way of the Dodo long ago . . .
and Buyers and Sellers would quickly and easily come to an understanding of "value" based solely on the size of the home. (Signed, sealed and delivered; it's been nice doing business with you.) Moreover, if selling prices were a foregone conclusion, ALL agents would be interchangeable and we'd simply work transactionally to draw up the paperwork and call it a day. ("Sign here, sign here, sign here, once more . . . thumbprint please.)
However, in the world of Real Estate, "value" is a subjective concept at best, not to mention a moving target. What's "valuable" to one Buyer, may have little to no value to someone else (i.e. hot tubs, swimming pools, billiard rooms, wine cellars, home gyms, and art studios.) Moreover, value propositions tend to shift over time as do actual values. (None of us is paying what our parents paid for their first homes.)
Years ago, when I first began selling real estate in the East Bay, large contemporary homes along Skyline were highly prized for their panoramic views and their spacious interiors. Now? Not so much (especially this week, given that the ash has obliterated the views). In fact, these giant "white elephants" can be difficult to sell with their vertical lots, too many levels, and rising insurance costs associated with "high-fire hazard zones."
Instead, smaller homes in "walk-to" neighborhoods, where Blue Bottle and the farmers' market is just a few blocks away, are far more popular. Consequently, Rockridge, Elmwood, Solano Avenue, Temescal, and Piedmont Avenue have all seen dramatic increases in home values in recent years. So if flat, urban neighborhoods, offering hip beer gardens and trendy restaurants are where you hope to hang your hat, expect to pay WELL over a million dollars for starter homes in these highly-sought after areas.
Enter Covid-19, and suddenly YARDS are the draw, and the bigger, the better. As such, Montclair, with its expansive lots and private locations has benefitted from a swell of activity this past spring and summer, as have Crocker Highlands, Piedmont, and Alameda. Likewise, the suburbs are now back in fashion, which means that Orinda, Lafayette, Moraga and communities farther afield are all experiencing strong demand. (So when I request a budget to redo the yard, that's the reason why.)
When I look at my own purchasing history, Cliff and I rarely put "price-per-square foot" at the top of our play list. Our moves were based on need and availability. And while our most recent purchase at Fallen Leaf Lake might financially make better sense (and cents) a year from now (IF the market corrects), that particular lakefront property we've dreamt about our entire adult lives will no longer be available. In short, we bought opportunity, knowing that the price we paid today will bear very little importance in the coming years ahead. And while we are fairly certain that we could have paid less for the same home last year, and that we might well pay less for a like-kind home next year, NOW is when that cabin happens to be available, so NOW is when we bought it. (It's taken until NOW for us to be able to afford it!)
But if painting by the numbers is important to you (as it is for many people) you may need to wait until the market shifts before you find the home that "adds up." That being said, considering the high demand, low inventory, historically attractive interest rates, stock market volatility, and political uncertainty, owning real estate might just be the safest place to keep your money for the moment (at least it's "real"). Because if inflation comes into play, your liquid assets could just as easily contract.
As none of us knows where this all lands, or how long we'll wait for the Coronavirus to resolve, or for a vaccine to be approved, or for political goodwill to emerge, or for clearer skies(!!!), we are forced to make do the best we can, WITH the understanding that these unprecedented times require a fair amount of coloring outside the lines. In the end, you have to do what makes sense for you, your family, AND your future, as trying to "time" the marketplace is nearly an impossible task. In the meantime, our job is to support you in whatever decision you choose to make.
How can we help you?
Julie Gardner, has been writing The Perspective for 18 years and has published more than 750 humorous but always informative, essays on life and real estate.