The Economic Valuation of Houses

We’ve been talking about houses again.

One of the truly great things about our marriage (and this is something that we don’t often think about) is that we have pretty much the same values about money. Thats a great help when we’re doing the ‘fumbling in the dark’ where you try to get a sense of whether something is worth the money that’s being charged for it. Economic theories of worth aside, there are things that are clearly worth the cost, and others that clearly are not. But that leaves a whole lot of things where you have to make the assessment yourself, and its one where two people with similar styles can come to radically different conclusions. (I almost wrote ‘conflusions’, which looks as if it ought to be a word.)

For example, we just received our annual copy of the Sharper Image catalog, one of the many that arrives at Christmas time. We only get one a year because we never buy from them, but when it arrives, we always leaf through it, nodding at some products, grimacing at others. (I just read ‘Blink’, about instantaneous subconcious decision making; its not great but the material about involuntary reactions to people and situations, in that regard, is really interesting stuff.) Our overall take is almost always ‘And people buy this stuff?’ Clearly, they do, and in sufficient numbers to continue the brand. Years ago I saw an English comedy called ‘The Fall and Rise of Reginald Perrin’ where the lead character, his life in ruins, comes back by starting a chain of stores where you are guaranteed that whatever you buy will not work. Absurd, of course, but then again, so is Sharper Image. Yet people just like us do buy into the SI concept. Why don't we? Because we're conservative -- about money, and other things. We change, but only if there's good reason. We spend, but only if there's good reason. As we (I hope not to the point of boredom) tell our offspring, that's how we got to have the modest amount of money that we have in the first place.

So when we talk about houses, we’re coming from the same place. We have the same values. And right now, our values are telling us that however nice that house was (and it was nice, though, you might say, not nice nice), it isn’t worth the money they want for it. Not that its terrifically out of line with what you might expect the price to be. Regular production houses around here are going for about $250,000. Our off the cuff estimate is that the additional things that the demo house has would add somewhere in the vicinity of $75 - $100, 000 to the cost. So that would mean that the house would sell somewhere in the vicinty of $350,000. They in fact sell it for $350 - $400,000. Its not more than a general match – for one, the regular production houses tend to be bigger than the custom one we looked at – but it sounds about right to us. Regular house plus $100,000 equals custom house. Custom 'smaller house than we have now' house.

We’re not willing to pay that. We’re not even willing to pay $250,000, if it came to that, but at least there we know that the bulk of that cost would be covered by what we earned in selling this house. If we bought the custom house, we’d essentially be giving this one away and spending the equivilent of a new production house to get.... this house. Better in multiple ways, but still... this house. Ah...no. We’re not going to do that.

So then the question is, what do we want to do?

Our next step is to look at the features we would want in a new house and see which ones could be put into this house. The biggest one -- and in fact the whole reason that we're looking at other houses -- is this: – how could we make this an accessible house for an elderly person. The thought that comes to mind is to put in an elevator, but no obvious place – or even not-so-obvious place – exists for that. Bedrooms at both ends, garage at one end, air conditioner hardware at the other, landscaping in front, deck in back – not at all obvious. In a better world, we’d be able to find a genial architect and sketch out some ideas. Say, about a hundred thousand dollars worth. (And if you don't think that thinking that number scares me, think again.)

We've even kicked around the idea of building a wing onto the house, to enclose an elevator, a new master bedroom, and such. Right over the ballroom with the crystal chandeliers and the floor to ceiling French doors which lead out onto the flagstone patio alongside the reflecting pool fed by the overflow from the enclosed pool and sauna, next to the hot tub in the natural rock grotto with the quietly splashing waterfall.

To quote from Stand on Zanzibar:

What an imagination I've got !