Buyers Willing to Pay More for Newer Homes

New Home

A common set of search criteria that I use for Buyers looking for homes in South/SW Austin is to search homes in Austin MLS areas 10, SW, and W, minimum 3 bedroom, 2 bath, 2 car garage, 1800 to 2500 sqft, and only those homes that feed either Bowie or Austin High School. Homes that fit these criteria have become much more difficult to find below $250,000. Many are selling for over list price in a few days.

Last week, I had to write 4 offers in 7 days for a buyer before finally getting one accepted. The 3 failed offers were all for homes brand new on the market, matching the above criteria, that we jumped on immediately. Two of the failed offers were above list price (one was substantially above – $225K list price, $239K offer), the other was only a full price offer. All three had other offers accepted that were well above list price. One agent told me he had 10 offers before 5PM, and the best offer was for cash, 8.4% above the list price. Finally, by venturing slightly outside the above criteria, we located a home in area SW that is superior to all the others in physical attributes, and priced below $220K. It just doesn’t feed Bowie High. My Buyer is very happy with this home though.

But as I see this part of Austin area continuing to enjoy very strong demand and about 13% appreciation in the past year, not all homes on the market are met with the favorable results outlined above. I have a hunch about why some homes seller for less than other even though they posses the same basic attributes.

Using the same search criteria, I filtered first for year built. Homes that are more than 10 years old don’t seem to sell if they are priced the same as comparable newer homes. It was the early 1990’s to mid 1990’s that larger master bathrooms started to become more common, with larger tubs and separate showers. Also, homes built 1995 and earlier, if they haven’t been updated already, are approaching an age that will require replacement of some of the more expensive components of the home such as Central Air and Heat systems, roofs, and appliances, and also many of the homes in this age range need exterior maintenance, painting and trim and fence repairs.

So how much do these age factors affect the desireability of a home? By quite a bit it seems. Let’s look at some numbers below.

 

Austin MLS Areas 10, SW, and W,
that feed Bowie or Austin High
Homes
minimum 3 bdrm, 2 bath, 2 garage, 1800-2500 sqft
All Homes
Homes Built 1996 or newer
Homes Built 1995 and older
Currently Active Listings (6/15/2006)
57
31
26
Average List Price
$250,436
$278,887
$216,524
Average Active Size SqFt
2192
2254
2120
Average List Price per SqFt
$114
$123
$102
Average Active Days on Market
33
39
26
# YTD SOLD Listings (Jan1 – Jun15)
234
134
100
Avg. YTD Sold Price (Jan1 – Jun15)
$234,751
$245,234
$215,137
Average Sold Size SqFt
2161
2184
2131
Average Sold Price per SqFt
$109
$112
$101
Average Sold Days on Market
34
33
36

234 Sales is a pretty good sample size. So what does this data tell us? There is about a $11 per square foot sales price gap between the homes built before 1996 and the ones built after. This amounts to a $30,000 difference in sales price for homes that are located in substantially the same areas with the same amenities and quality of life. Are there older homes that sell for more than their newer counterparts? Yes. We often see very nicely updated homes, as well as newer homes in poor condition. But some of the homes built in the early 1990’s still have a 1980’s feel to the floor plan with lower ceilings, smaller kitchens and baths, and the aforementioned condition issues. This is enough to cause buyers to be more than willing to spend the extra $30K to live in a home that feels newer and is perhaps more functional.

Many of the neighborhoods that feed Bowie and Austin High Schools in Areas 10, SW and W, have a broad range of ages. Circle C was started in the 1980’s and is still not finished. The Villages of Western Oaks and Legend Oaks also have homes ranging from the late 1980’s to the early 2000’s. When performing a market analysis for a home in these neighborhoods, the older ones will be over-priced and the newer ones under priced if the comparable sales are not separated by age, even if the homes are only a block or two apart in distance.

Posted by Steve
10 years ago
Steve

Steve is a Real Estate Blogger, Husband and Dad, UT Austin Grad, Runner, Real Estate Broker and owner of Crossland Team and Crossland Real Estate in Austin TX.

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scott - 10 years ago

are the $’s per sqft # off a decimal or two?

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Steve - 10 years ago

Scott,

Yep, you’re right. Thanks for catching that. I fixed it.

Steve

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