Tiny in size, a Cupertino home is selling for big bucks: $1.7M
latimes.com
latimes.com
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+.
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.
That isn't just interesting, it's fascinating.
A developer may have their own financing arrangement.
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.
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.
Sure, back them out of the appreciation.
> you participated civically
...by voting to block development that might have reduced your appreciation. Lol.
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.
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.
> Neighbors told Perez that the home was initially used as a hunting cabin.
A 1940s recreation instrument.
> It was later used by the family as a rental but became vacant for some time.
Then vacant.
Agreed that Prop 13 and China are both getting this wrong, too.
"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
https://www.landvaluetax.org/history/winston-churchill-said-...
> 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.
Almost as if “doing things for the community” yields nothing close to the returns of “own shack and wait.”
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.
In Cupertino, 99.9999% of the appreciation is due to the ultra high-paying jobs there.
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.
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.
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.
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.
Own it long enough and the city may come to where you are, with bizarre results.
These prices are nuts.
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.
I'm waiting for my area to allow multifamily and or detached ADU before I build.
Thank Scott Weiner for the builder’s remedy.
https://sanjosespotlight.com/cupertino-spent-affordable-hous...
Scott Wiener did not create the builder’s remedy; it was created in 1990 and rediscovered by Chris Elmendorf https://twitter.com/CSElmendorf/status/1474286606982934528 https://escholarship.org/uc/item/38x5760j. But Wiener did make the builder’s remedy apply to more jurisdictions by increasing the RHNA quota (SB 828).
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.
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.
Is that a big lot for that neighborhood? 0.18 acres?
Makes my 0.33 acre lot seem overly spacious.
Much of Santa Clara Valley has "R1-8" zoning, which means "detached single family homes, 8 per acre."
43,560 / 8 = 5,445 sqft lots.
7,900 sqft is larger than average for many comparable neighborhoods.
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.
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.