Once, California was the "Queen of Expensive Houses", from Santa Monica and it's multimillion dollar houses near the beach, to Beverly Hills and the multimillion dollar houses of the movie stars, to those houses near the HOLLYWOOD signs, a 1800 s.f. house could reach $1,000,000, $2,000,000 and a 2,500 s.f. house could rise to $3,000,000 or $4,000,000.
But now house prices have skyrocketed throughout the country and particularly in the Southwest, where Arizona, New Mexico, Texas and points further east have risen to record highs
Some call it the Coronavirus effect. People have left apartments and condos in big cities like New York, Chicago, Miami in droves, and are buying up houses. A 4,000 s.f. house in Texas was selling for $80 psf just a couple of years ago, ( $320,000) but now the same house might sell for $200 psf ($800,000) but in parts of Texas and New Mexico we are seeing 4,000 s.f. houses selling for $280 psf ($1,120,000). Not really Hollywood or Beverly Hills prices, but getting higher and closer every week. People want a big house, big enough to enjoy during another Corona Virus, or a place of refuge if we see social violence and unrest.
People, from secretaries to business executives are seeing how they can work from their homes, instead of fighting traffic, paying expensive parking, and having to leave and drive an hour or more one way to their office every day.
People see that a big house has tax advantages, much of the interest is tax deductible.
Plus if you later sell that house there are some ways to avoid capital gains taxes, if you use the proceeds to buy another house.
Lumber costs are up 80% to 100%, so it costs more to build a new house, this in itself helps drive the prices of existing houses up.
The cost of labor to build new houses has also gone up...making all houses of greater value.
WE ARE IN ONE OF THE HOTTEST HOUSING MARKETS IN US HISTORY.
When I was a young man in my first job as a banker, the elderly bank President, put his arm around me and said:
"Young man, go out and buy the nicest, biggest, house you can afford. It is the best long term investment you can make, and will become a foundation of your growing wealth as you get older." He was right. I bought a house, upgraded it, remodeled it, sold it for a profit, and bought another, and another. In my life I have owned 17 homes. Every one of them has made me money, save me taxes, and given me the room to run my businesses, raise a family and entertain friends. " I told another young man the other day. It was true 50 years ago, it is still true today. Buy a nice home and then upgrade from there. It will do you well over time. Pick a lifestyle and an image, and then live it well!
Consider this. Lets say you have a house you think is worth $300,000. Say your payment is $3,000 per month, and taxes are $1,000 a month so the place causes you $4,000 per month.
Now if you don't have to drive downtown to work ($200 a month in gasoline or car expense), $400 per month for parking, $100 per month for freeway tolls or other travel expense) you might be saving $800 to $1000 a month just by working from your new, big home.. Plus you have a spacious place to enjoy living, perhaps a yard, patio, and pool. Plus those payments for the house, are largely tax deductible (up to $10,000 per year in interest), and you can depreciate expense the portion of your house that you use for business. Ah yes, working from your home can save you enough, almost to pay for the house you spent so much for.
But go back to "imputed expense" of having a home. Instead of the $3,000 a month payment, you also have to add all of those other expenses, and then you can figure out how much rent you would have to pay per month, if you decided to rent a condo downtown near your office.
Ben Boothe, says: "The best investment considering all factors, is to buy the biggest house that you can afford. Consider the image you want for your family. Plan how long you will keep the house before your step up to a better and more valuable property. With inflation, tax deductions, and changes in lifestyle, a big house in the USA will make you and your heirs money!" The first million I made was because of buying and selling homes. Then one day, I had a good enough net worth to buy and build something I really wanted just for my and my wife's dreams.
"DEFLATION HAS TURNED INTO INFLATION, NOT BECAUSE INTEREST RATES HAVE GONE UP--THEY HAVE ONLY GONE UP A LITTLE BIT--BUT BECAUSE HOUSE PRICES ARE JUST CRAZY." MARK FLEMING, CHIEF ECONOMIST AT FIRST AMERICAN FINANCIAL SERVICES.
Real estate markets don't often behave this way. As an Appraiser, we see an advantage in "jumping onto" trends like this, and using wises investments to grow your lifestyle and net worth. Years from now, you will brag "I bought that house a decade ago, and now it has made me so much money."
If you need an appraiser, appraisal or someone to help you consider the value of investments, call us: www.benboothe.com 817 793 1484