The headline should read: "7900 sqft lot sells for $1.7M"...
This was true for our house mid-peninsula: The appraised value of the land was 95% of the purchase price; the appraised value of the structure was less than the cost to bulldoze.
Given the proximity to Los Altos, this house will be purchased by a developer & razed, and they'll build a new 4000-sqft 2-story which will be listed for $5M+.
Gotta love it because definitionally all of the lot owners’ new wealth was not created by them, but by the community around them and despite their withholding that land from anything useful.
If you've lived in the community for awhile and helped develop it, some of the community's value really could have been created by you. You paid property taxes, you frequented businesses, you participated civically. Conceivably, if a bunch of rich do gooders moved to Gary Indiana and...gentrified it...they created wealth (for better or worse, obviously).
Pure speculation and rent seeking doesn't really do anything but leach of someone's else effort. Wealth doesn't appear out of thin air, it was created somehow. In the case of Cupertino, Asian immigrants from the 80s as well as the obvious tech scene made it a desirable place to live. Not everyone just bought property and sat on it just waiting for something to happen, people had to actually make it happen.
I guess if you want to make money as a speculator/rent seeker, you look for people doing things to improve and then take a bet that things will get better than other speculators think. But you are relying on other people doing the work for you, which is risky.
I question how much of the appreciation is the 'community' volunteer efforts when shank-fest parts of Oakland and other places where negative externalities from non-owners dominate yet property owners are experiencing similar wild appreciation rates.
The most dominating recent appreciation in value is the privilege of a coveted fed induced near 0% mortgage. Owners can laugh at the next generation, damning them to essentially pick up the inflationary tab of their negative real rate loans.
The 2.75% mortgages are nationwide. Any differential appreciation is due to the locality (and for the most part not due to geographic realities but cultural/social/economic realities).
In Cupertino, 99.9999% of the appreciation is due to the ultra high-paying jobs there.
If you disentangle the wealth these owners have accumulated as property owners from the other things they've done in life then it makes sense. These conversations always go the same way:
"These owners become wealthy from the work of the community! They didn't create anything!"
"Nuh uh. They volunteered at that beach cleanup and are thus rightly entitled to any property wins."
It's not a new discussion. Here's Churchill talking about a century ago
> To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced.
I thought the parent made some good points that I hadn’t considered before. Why are you “Lol”-ing (I assume derisively)? Did they disrespect you in a way which justifies rudeness?
The return for participating in your community is participating in your community. The return for opening a store and serving your community is the revenue you get paid for serving your community.
Note that you can do NEITHER of those things and get far more returns than someone who does both, if you merely buy land early and sit on it. In fact you get to extract wealth from the people who do either/both in perpetuity. If they find more ways to be more valuable to the community, good news for you: you get an even bigger paycheck for doing literally nothing.
So yeah, if they did x y z things in their community, they got all the returns of x y and z… and the returns of simply owning land.
Not to pattern match too much, but the person who winds up with a shack sitting on a $2MM lot in an ultra-high COL area is almost certainly not a major contributor to community thriving.
So a speculator, they are taking a chance that the work of others will improve the community and raise their investment. Got it, morally not right, but also very risky, these people lose their shirts just as often as they make it big.
Ok, then the old couple who bought the "shack" in the 1970s and finally are selling now. Why do you claim they weren't a contributor in the community? Let's say the guy was a garbage man while their wife worked for the DMV. They raised their kids and whatever, in that shack. They never banked on it being worth $2MM, it just happened. They provided value to the community, ok, they didn't create that much value, but its not like they were camping on the land just for the appreciation.
The real problem with CA is proposition 13, which makes the cost of owning and sitting on land relatively cheap over a long period of time. But ya, that garbage man would have been forced out of their house maybe in the 90s without it, but it would make property speculation a lot less profitable because long term positions would be very expensive.
In China, this is even a larger problem because they lack property tax at all in most places, you pay your taxes up front in a land acquisition tax and then you can just leave your apartment unrenovated and market it as brand new 20 years later to make a few million dollars.
Nah it was created by them when they voted to make housing an NFT limited by very high barrier regulatory environment. They bought in before the minting cost was wildly raised at their own direction.
In many cases in CA the non-property owning community drags the property value down because all those pesky people you made homeless through idiotic policy are shitting on your sidewalk, and rich potential buyers don't enjoy that.
> and they'll build a new 4000-sqft 2-story which will be listed for $5M+.
Cupertino regulations won't let them build quite that big unless it's two stories and basement, but yeah, you're right about what will most likely happen.
> this house will be purchased by a developer & razed, and they'll build a new 4000-sqft 2-story which will be listed for $5M+
Reminds me of this empty lot that sold for about $4M https://archive.is/z9tru , if you believe Zillow/Redfin, they claim the property is now worth $12M.
Not news worthy, but definitely interesting. One camp says that the purpose of property rights is to incentivize value-additive economic activity by connecting investment to reward. A different camp says that the purpose of (asset) property rights is to pay rich people for being rich, thereby establishing and reinforcing a class hierarchy where the people on the bottom pay to exist and the people on top get paid to exist.
Improvement value has a shape that mostly fits the former narrative while land value has a shape that mostly fits the latter narrative. Whenever you observe a sale that establishes a relative proportion between land value and improvement value, you are observing the market's revealed opinion on the relative validity of these conflicting political narratives.
do you skip various forms of property insurance (other than liability and contents) ? Or does the mortgage company (if you have one) require it anyway and you're basically paying for nothing?
I can't speak with certainty on the topic, but my guess would be that you're starting -- assuming you're an individual buying this lot to build a house to live in -- with a building loan which will turn into a mortgage when the house is finished.
A building loan is how the bank limits its liability on a property that cannot yet act as collateral to a mortgage -- you go to the bank with a plan for how you're going to build a house, and they only give you the funds to complete it as different milestones are met. You get so much money for the foundation, so much for the framing, etc etc etc.
If you successfully build a house in the time period given, the loan converts to a mortgage, secured by the new house, if you don't ... I'm not sure actually. Probably they start expecting payments on the loan at the much less favorable unsecured loan rate, then take over the property when you fail to make payments, to auction off and minimize their losses.
Depends on the kind of loan. A conventional loan requires a home to be habitable and for the buyer to live in it for a specified amount of time, plus insurance.
A developer may have their own financing arrangement.
They are buying the lot. That lot size in Cupertino will allow you to build a house that is 3,555 sq ft, which is bigger than most homes around it (they average about 1800 sq ft). If you build it with a basement, which a lot of new construction is doing around here, you can get up to 5,700 sq ft, since Cupertino doesn't count basement space against you for FAR regulations.
That's a pretty big lot around here, and the developer who buys it and builds the max house on it will sell that house for close to $5M.
Connection to utilities, unique grandfathered permit that is essentially unrepeatable due to asinine new regulations, roads, landscaping etc all represent huge value too. I built a 600 sq ft house myself and half the cost were the aforementioned.
This is pretty much the main reason why I will move from US to Europe in the next couple of years. I'm not keen on dumping my life savings into a down payment and then have a balloon mortgage to buy a shack in my area when I could use a similar amount of money to basically buy myself a palace back there.
You can absolutely build a new hone. The conundrum is that the land value is so high that you have to build as big as possible with finishes to match the neighborhood, even if you don't need the square footage.
I'm waiting for my area to allow multifamily and or detached ADU before I build.
Cupertino is being sued for violating state law for not rezoning for housing. In fact, Cupertino spent funds allocated for affordable housing on lawyers to fight against affordable housing.
It sounds like you disagreed with the parent comment but then you demonstrated his point. You can build a new home, but the zoning code should have allowed you to build many homes instead of just one.
The party deciding how big to build probably isn't going to build to stay there (if so, they are just optimizing for the highest profit, not facing a conundrum).
I live in a place with no building codes (and barely any zoning regs) and raw plots i looked at asshole boomers encumbered their title with irrevocable CC&Rs preventing small starter homes before they croked. Most the properties I looked at were poisoned this way making it totally impossible for young starting families to stake down, it was quite infuriating.
You'd be surprised even in rural undeveloped areas how hard it can be to build, it's all gotten much worse in the past 50 years. In the city they damn you with onerous permit and utility connection requirements, in the country they slit the throat with ever more onerous septic and well environmental restrictions which of course were voted in by people who grandfathered their own property in.
300 sq ft of land and a used RV to park on it might be affordable. People might not like some the implications but it's probably cheaper and more sanitary than the alternative of those people in tents.
Counterintuitively, no. People by and large are buying a token for a build site. Look at any zoning area for SFH and a massive portion buy the least acreage they have to.
By creating far more tokens the price spirals down, even though utility rises. The utility of land actually has a pretty weak link to its price.
Take at the extreme of housing fitting into a pinpoint. No one even needs to buy your land even though it now has infinite housing utility -- even though essential it is abundant so it becomes cheap like water.
> It received eight offers, all above the asking price, and the winning bidder is expected to close escrow in May.
If they set up the writing desk in the entrance way, and keep the front door open, the bidder should have enough elbow room to be able to comfortably sign the papers.
I’m not sure why the downvotes. A tiny fraction of an acre is utterly ordinary or really fairly small in many suburbs and certainly exurbs in many/most areas of the country. Certainly where I live outside of Boston which is generally not considered a LCoL area.
Multiple acres are very normal in my town which is probably at least as close to Boston as Cupertino is to SF.
I understand various attractions of the Bay Area including all the area that is decidedly the ‘burbs but make no mistake that even tiny amounts of land is decidedly insane relative to the areas outside of most other cities including those reasonably considered as tech hubs.
It’s really difficult to compare city statistics. Boston includes some really pretty poor areas like Roxbury and Dorchester that don’t have a real counterpart except for very small areas of SF. The 80% high end of the median only differs by about 10%.
I agree that Boston is very different both because of industry diversity and fewer geographical constraints other than the ocean. But the fact remains that although there are some very expensive communities, many though not all on the ocean, an hour drive gets you to some pretty reasonable pricing—say $500K on multiple acres.
This was true for our house mid-peninsula: The appraised value of the land was 95% of the purchase price; the appraised value of the structure was less than the cost to bulldoze.
Given the proximity to Los Altos, this house will be purchased by a developer & razed, and they'll build a new 4000-sqft 2-story which will be listed for $5M+.