July 12, 2008

Does Style Have Value?

A reader recently asked me if the style of a house impacts its value when the market is in decline. The question came up because a friend of the reader owns a beautiful Spanish house in an area where there have been dramatic price drops over the past year—so if the friend sells, is she going to have to take a bargain basement price for her casa, or does it have more price-power than its neighbors based on its condition and vintage?

Well, there’s no perfect answer to that question — but here’s what I’ve got. Style does matter. Certain types of homes (a 1920’s Spanish, or a Craftsman, for example) are going to be desirable in any kind of market. These are the homes with emotional appeal, the ones you walk in and envision the long dinner parties you’ll throw in the enclosed courtyard, or the cosy nights by the fireplace in the mahogany-paneled library. These are the kinds of houses that are still selling fast, even in this market. They may not be selling for the price they would have a year or two ago, but you can bet they are selling for more than the 1970’s square box-house down the street. But having said that, location is always going to be the key factor. Pick up a Glassell Park Spanish and put it in Beverly Hills, and obviously you have a different price, even for the exact same home. So homes with emotional appeal in more established and desirable areas are retaining their value better than beautiful homes in lesser areas. Here’s an example:

• In the Moreno Highlands (arguably one of the best parts of Silver Lake, and on one of the best streets), here’s a Spanish colonial 5/5 with a pool, listed at $1.9 million. Other similar houses nearby aren’t as much, but they don’t have the same appeal (or the pool). Here’s a really stunning “gated chalet” in the same neighborhood with similar square footage, but it’s listed for $1.199. And here’s a completely-redone traditional with views of the reservoir and it’s in the Ivanhoe School District—for $1.395. So while this one may not get its full asking price, I will be surprised if its doesn’t sell for more than other nearby properties based on its combination of location and style. But…..
• Over in Eagle Rock, here’s an amazing Craftsman farmhouse that I’ve looked at a long while ago when it went on the market. It needs work, but the house is gracious and spacious. It’s listed at $895,00, based on its emotional appeal (and its 2,800 square feet). But here’s an example where in my opinion location is going to trump style. It’s not on a great street, and other nearby for-sale houses aren’t in the same price range. Here’s a similar-sized one up the hill (arguably a better location) listed for $785,000. And here’s one that recently sold for $777, 750 (short sale? Foreclosure?). I’m guessing this one will have to come down a lot in price before a buyer will overlook where it is for what it is.