For the last several months I’ve been talking about the bifurcation of old and new properties here in Sarasota. I want to specifically define “New” – in my mind, there are three categories in which we can classify something as new.
1) BRAND NEW DEVELOPMENTS
This refers to when a developer clear-cuts a piece of land and builds brand new homes. Location is secondary in this situation.
2) INFILL DEVELOPMENTS
In this scenario developers take an old property in a desirable location, completely demolish it, and build a new condominium or single-family home.
3) TOTAL REHABILITATION
When an individual takes a unit in older buildings (pre-2007), which are in the best locations and completely re-engineer the preexisting units to make them spectacular and competitive with the new inventory on the market. This would entail stripping everything back to the original outside walls and then creating a new floor plan and finishing’s that capture what today’s buyer wants.
NEWER PROPERTIES APPRECIATE AT GREATER RATE
I’ve been talking about the desirability of new properties- how they are selling for a premium and older properties are selling at a discount. Let’s use some numbers to specifically explore these phenomena. I took a look at properties that were built before 2000 after then after 2000. It’s not a perfect proxy, but it allows us to see that there’s a big differentiation.
- OLDER THAN 2000. The median price of properties that were built before 2000 increased by 2% from 2018 to 2019.
- NEWER THAN 2000. The newer properties, those built after 2000, increase by 3% in their median price over those two years.
There is a 50% increase in the value the market places on newer properties from 2018 to 2019.
More importantly, we see the median price of newer properties selling for about 24% more. A newer home would be selling for more than $1M, whereas an older home selling in the same location would be selling for less than $800,000. For the Buyer willing to do work they are able to create equity because the discount is greater than both the cost of the rework and market value once a reinvigoration is complete. To be clear this is more than just new counter-tops, cabinets and paint.
For sellers, don’t put off your deferred maintenance or updating your granite. If you’re planning on moving in the next one to three years, do the renovations or updates today and enjoy the benefits. Today’s buyers do not want to do any work. They don’t want to do any fixing up and they certainly don’t like granite that was in style from 10 to 15 years ago.
It may be difficult choosing where to draw the line regarding re-construction or knowing how MUCH of a discount should be taken.
For strategies and success in your next sale and/or purchase, give me a call @941-587-0740.