[lhorie]

> The new house on the split lot has a sale value of $1.5M

Maybe I'm just not understanding this right, but does this mean that that example house which currently is estimated at a $1.3M value would be split into two, each with a market price of $1.5M, despite both having half the lot size? How does that work?

And shouldn't the house next door then logically sell for 3M based on lot size?

Sorry if I'm missing something.

[turtlebits]

The new house has a value of 1.5M. The existing house would be worth less because of the smaller lot (but not by a substantial value).

[baskethead]

This is probably untrue. Why would someone pay the same price for half a house? I think the market prices would readjust very quickly.

[yholio]

I think the 1.5 million price is a snapshot of the current market, with low availability of housing and most people unable or not knowing they can split the lot. So houses are priced for their livability.

If it starts to happen in mass, either the supply will depress prices or the existing houses with splitable lots will close to double in value to internalize that unrealized gain.

[menage]

That's 1.5M for a brand new house on the half-lot, versus 1.3M for the existing 60 year-old house on the original lot. Since the new house cost 700K, then in theory the lot next door could sell for 1.6M if you're assuming that you can split it via SB9, build two 700K houses, and sell them for 1.5M each (one of them after waiting 3 years for SB9 requirements).

[notahacker]

Coming from outside California's property market, it still seems odd that faced with a choice of [A] a 60 year old suburban home with decent-sized gardens front and rear or [B] a brand new property which must be squeezed into a garden space taking up less than 1/3 of A's plot with essentially no space left over for anything that isn't floorplan, people would typically value the latter property more highly? Is the build quality or design on older homes that iredeemably bad?

Seems an awkward example of a plot to split without demolishing the original house too, but I guess that's more common than a plot that's easy to split.

[burlesona]

This isn’t just happening in California, in Austin lot splitting has been a thing for a while and the new houses that get built in the back yard of the old house often sell for as much as the original house would have.

It’s actually not hard to understand. People have a certain amount of budget per month they can afford, which converts into a certain mortgage value. Then they look for the neighborhood they want to be in, and whatever they can get inside that mortgage budget is on the table.

So they see two options:

Old house from 1960, 1800SQFT, 2 bathrooms, low ceilings, needs tons of renovation but has a nice big yard. $700k.

Same neighborhood. Brand new house. 2400 SQFT. 3.5 bathrooms. High end finishes. Almost no yard (it’s a half-lot). $700k.

Most of the people buying this are coming from rentals where they probably didn’t have a yard in the first place, and they are already stretching to the limit to afford anything so they won’t be able to remodel after purchase. So, no yard? No problem.

[dionidium]

Something I've noticed with gut rehabs and new construction in my hometown is that a) people routinely express disbelief at the asking prices for these homes; and b) they easily sell at those asking prices (or above).

The market seems to be saying that people really value new construction relative to older homes, even if that's surprising to some people.

[kristianp]

If you imagine that the new house might have more bedrooms and bathrooms than the old house, and more modern design. I can see why the new one would be valued higher.

[notahacker]

The example says it's a "same-size house" which I assume means the same numbet of bedrooms and bathrooms. A more modern design is a given, but I'm still perplexed by the notion a modern design might be expected to be so superior that a house squeezed onto a front lawn would be worth 15% more than a same-sized house in the same location with a front lawn, and a back lawn, and a whole double garage and driveway rather than maybe a share of it.

[thrwn_frthr_awy]

In my HCOL area houses are mostly prices by price per square foot. Lot size obviously has a affect on price, but not to the same extent.