Is Driving Farther for Cheaper House Worth It?

While looking at homes yesterday in the Creekside Park subdivision in Buda, just south of Austin, I went into a home that seemed familiar. Then I realized it was the identical floorplan of a home in Legend Oaks (South Austin in Oak Hill) that one of my buyers closed on this week. The home in Buda is listed for $214K and my buyer’s home was listed for $245Kin Legend Oaks. Would it be worth saving 31K to live in the exact same home in Buda versus Legend Oaks? Or, put another way, if my Buyer had been willing to consider homes as far south as Buda, would I have recommended the identical home in Buda over the more expensive home in Legend Oaks? In this case, no. Let me explain.

While the home in Buda is actually a bit newer, in nicer condition, has better cub appeal (Texas Limestone instead of brick exterior), and backs to a forested greenbelt area, the home in Legend Oaks is a superior investment regrdless if it’s an owner occupant or an actual investor making the purchase.

Let’s look at some numbers:

Comparison of same home in Buda vs. Legend Oaks
Legend Oaks
2794 Sqft
2794 Sqft
List Price
Distance to Downtown Austin
17 miles
9 miles
Avg Sales in Neighborhood
YTD 2006
Avg Sold Size
2105 sqft
2336 sqft
Avg Sold $ sqft
Median SOLD
Avg Days on Mkt

The home in Buda is one of the largest for that neighborhood, so it’s value will always be somewhat pulled down by the smaller homes around it. In fact, nothing in Creekside Park has ever sold for more than $200K. Buying this home would be setting a new high water mark for sales in the neighborhood, and the list price is 33% higher than the average sales price of the neighborhood. It is also a longer commute into Austin and is not surrounded, as Legend Oaks is, by ample shopping and restaurants just minutes away. Buda is still a growing, emerging area – an area I like by the way – but this would be the wrong house to purchase in Buda, under any circumstance, at a list price of $214K and I would strongly advise any buyer against choosing that home.

The home in Legend Oaks is surrounded by other homes of comparable size and value. Of the 37 sales in Legend Oaks to date in 2006, only 6 have sold for less than $200K. The day will soon come when no home ever sells again in Legend Oaks for below $200K. The list price of $245K is 9% above the median sales price for the neighborhood this year, which is an acceptable range in a fast rising area. The home in Legend Oaks has a very good chance of appreciating to more than $300K in value in the next 2 to 3 years. The home in Buda, in my opinion, will not reach a value of $300K sooner than the next 5 to 10 years. Finally, the home in Legend Oaks will rent for about $1700/mo. and the one in Buda will be lucky to fetch more than $1300 per month in rent, so from a pure investment standpoint, the additional rental income of $400 per month is well worth the additional purchase price of $30K more.

This is a no-brainer in my opinion. Even if the buyer simply cannot afford to pay more than $214K for a home, loved this floorplan, and didn’t mind the extra commuting distance, I would recommend against purchasing this home because it is over priced for the area in which it is located. I would instead take the buyer to neighborhoods where $214K is at or near the median value of homes in the area so the home they do purchase has a better chance of appreciating in value.

The above is an example of the type of purchase analysis that every buyer and Buyers’ Agent should perform. You have to look at more than just the floorplan and price. You have to look at the floorplan and price in relation to the location and value of surrounding homes. To ignore these factors is a mistake and will result in disappointing value appreciation when it comes time to sell the home.

2 thoughts on “Is Driving Farther for Cheaper House Worth It?”

  1. the problem is right now is that there are very few inventories available in the Convict Hill area while there are plenty inventories to choose from in Buda. I guess that’s why people still go over there. They are not investment minded people. They just want a bigger nicer place to stay. Enjoy the life while they can. Who knows, we may be dead tomorrow for an freaky accident, do you regrat not being able to live in a nicer house sooner?

    Have you been the Twin Oaks by KB Home recently? That one is at South First and the edge of travis county. What do you think about those homes? Also, KB is getting into Circle C. They’ve been trying very hard to get their head into the upper end homes lately. I’ve seen some of their model houses. They put in some upgraded items like rounded corners and higher ceilings as standard items.

Comments are closed.