My house is worth more now, right? Or maybe it’s worth less because of that one thing? I get questions like this all the time, so here’s some thoughts swirling through my mind. Skim the headings or dig in. Anything to add?
Questions I’ve heard recently:
- Will prices rise because a nearby restaurant got a Michelin Star?
- Did my value go up because of the new arena in Downtown Sacramento?
- My house is worth more because Lady Bird was filmed here, right?
- Is my house worth more because of that $5M record sale?
- Would values decline if a new hotel is constructed 1.5 miles away?
- A new Starbucks down the street makes value go up, right?
- Will it damage neighborhood values if there’s a cannabis facility nearby?
- Will a new gas station impact neighborhood prices?
- Will the Golden State Killer’s house affect my value?
- Are values going to decline if the school district is taken over by the state?
- How will adding a casino nearby affect value?
- Will prices go down if that new teaching hospital happens?
Not a dissertation: Many of these questions are truly complex and they could be research papers. At the same time we read some of these and think, “C’mon man, there’s no way that impacts value.”
Quick truth: We can get so trigger-happy about thinking everything makes a difference for value, but that’s just not the case. It’s like when a home owner says, “Yo, I got a new faucet in the bathroom. How much does this add to value?” Probably nothing. The market just isn’t that sensitive.
My Michelin Star poll: I ran a poll on Twitter after getting a fantastic question about whether Sacramento’s first Michelin Star would be a positive for the surrounding residential neighborhood.
This wasn’t a scientific survey, but it’s interesting to hear what people think. I tend to agree with the majority too. My sense is the Michelin Star will give bragging rights to neighbors, but I’m not sure buyers would truly pay more in an entry-level area to be closer to a top-tier restaurant. Keep in mind if this restaurant did begin to help the commercial market thrive, then maybe that could spill over into the residential market. Otherwise let’s not overthink this.
Generally speaking: If something has little impact on an area, it’s probably not going to affect value much. Let’s remember that when making value claims and thinking through issues. But if something persuades or dissuades buyers, then it could be a big deal for the market. In other words, will people buy or rent for more or less because of the thing? This is the type of market-based thinking we need to consider.
The arena: As an example, the new arena in Downtown Sacramento has been a game-changer because it’s drawn people and other businesses into the city. It’s been a catalyst for development in the immediate market. But that doesn’t mean a buyer ten miles away would pay more for a house because of the new arena. I say fat chance.
Lady Bird: Would someone pay more for a house because the movie Lady Bird was filmed in the neighborhood? I’m not saying the answer is NO, but I just haven’t met a buyer yet who said, “I totally paid more because of Greta Gerwig’s cinematic masterpiece.” Objectively speaking, I can only find four listings that mention the movie too, and that may be telling.
1) Let’s be cautious about assigning too much value weight to trivial things that probably don’t influence buyers paying more or less. Does it really mean something for the market? That’s the key.
2) Let’s think critically and be sure to look to data to support our value conclusions. At the end of the day we can make claims about how a certain something impacts the market, but what do stats and data actually show? That’s what matters most.
“Beyond the Bubble” article: I wrote a piece for Comstock’s Magazine this month called Beyond the Bubble. These are things on my mind lately with so much talk about whether we’re in a bubble or not.
Questions: What questions have you been asked lately? Have you seen one type of business or something else impact an entire area? What do you think of any of the questions above? Let’s chat.