Tract Home Value

MagdalenaLeeAugust 2, 2014

Mom wants to move so I went with her to a tract home development yesterday.

In my opinion, this particular development was above average quality for tract homes. From the outside, it looks pretty typical with a trillion houses tightly crammed together on postage stamp lots. However, the yard maintenance of existing homes was above average. The houses all have a "same" look to them but there are a variety of plans to choose from as well as different types of stone/brick combos which gives the development more interest.

The interior standard features really set this development off from the rest. For example: Wide baseboards & trim, 10-12ft ceilings, solid wood 8ft front door, 8ft interior doors, vinyl tilt-in sash windows, drop-in appliances, granite countertops, sprinkler system, full sod and (tiny) landscape package, etc.

I couldn't see the structural features (they are on-site stick built) but I was told that the average utility bill is $200 a month for a 2500sf house, which is pretty good in Texas. I did see that they had several return vents all over the house. The literature says the HERS (home energy rating system) index is 73.

You can google Gehan Homes in Texas if curious.

The options are pretty much endless which can jack up the cost of the home up to $150k. The sales lady was surprisingly forthcoming about specific upgrade costs and she did say that they have appraisal issues when upgrade options are over the top. She also said that rarely happens and most people pay cash if they are upgrading that much.

I took all this info home and did some research. Based on figures the sales lady gave me, I took the price of one of the plans and added $75k worth of upgrades. Stuff like adding a 2nd floor gameroom, extended patio, frameless shower, wood floors throughout, etc. I came up with a price per square foot of $116. Then I went online to see what homes in the area/same development are reselling for. This development started in 2009 and I found six homes on the market that averaged $123sf.

I know I need to see what homes actually sold for but this is a seller's market so I'm guessing they are getting pretty much the asking price. This area is just outside of Austin, and if you watch real estate news, you know that this is the fastest growing area in the country right now.

So, after all that I come to my point: Is it possible that a tract home development is a better deal (I won't say investment) than building custom or buying pre-owned?

I have a theory that these tract homes don't appeal to everyone even with a lower price per sf because you have to put a cash 25% deposit down on upgrades and these houses take about six months to build from contract signing. However, they're selling like hot cakes.

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In another forum, weren't you considering moving your parents in with you because they couldn't afford their current mortgage if your Dad retired? Do they need 2500 sq ft and a game room? Or were you just trying to compare to a custom home?

    Bookmark   August 2, 2014 at 1:51PM
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Not considering, just spitballing options. The 2500sf house with game room is just a comparison to other homes on the market. They wouldn't need anything even close to that size.

This is more of a general question/curiosity and not necessarily pertaining to my specific situation.

    Bookmark   August 2, 2014 at 2:44PM
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Any tract home buyers or real estate agents want to weight in?

    Bookmark   August 5, 2014 at 9:17AM
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-->Then I went online to see what homes in the area/same development are reselling for. This development started in 2009 and I found six homes on the market that averaged $123sf.--

Be careful. 'What they are reselling for' and 'on the market' are two different things. There can a world of difference between the amount a house is listed for and the amount for which it could be sold. It is not uncommon for me to find $425/sq ft. listings in a neighborhoods where the comps (like sold homes) are in the $250/sq' ballpark. There often isn't anything remarkable about the expensive listings, other than the amount of time they sit on the market without a buyer. You said you took an average of the houses on the market? Consider, if the lowest price/sq. ft. house hasn't sold at their listed price, why would one at the higher "average" price fare better on the market?

Are the resale homes also 'selling like hotcakes'? Sellers want to get the money they spent on the house back. But why would buyers pay that amount for someone else's choices, when they can purchase a new home in the same development, with the features they choose, for a similar amount of money? A few years down the road, when more owners are ready to move on, the competition of having more houses of a similar style on the market may make it more difficult to sell, simply due to the amount of competition.

There are a lot of additional factors to weigh about purchasing a house in a tract that is still under development. It isn't necessarily a bad choice; some developments increase in value after being built out. But established neighborhoods are often easier to gauge the resale environment for the time you expect to list.

    Bookmark   August 5, 2014 at 1:10PM
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We thought tract houses offered a good price for what we got when we bought our first few houses. When we looked at resale homes, the price was high, especially with wanting to throw out the drapes, carpet etc included in the home price to make it fresh and to our taste. Custom construction costs more often because of no economy of scale and because of custom touches and more expensive elements. You and your mother need to decide what is important to her as well as affordable. To me, a retirement home needs to be one story, no stairs, an a manageable size. Having said that, at 73, I still live in the home where we raised our kids and cook all the holiday meals for those who can attend. I can also put them up overnight, which we enjoy.

    Bookmark   August 5, 2014 at 6:20PM
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Are the resale homes also 'selling like hotcakes?
I'm not sure but within the zip code and price range, the average days on the market is 69. Selling after three months used to be considered fast. Found that info in a local publication.

Yes, trying to predict competition a few years down the rode is a concern, but getting the best value right now is my conundrum.

Thank you for your insight. I was hoping someone who has lived in and sold a tract home would weigh in.

    Bookmark   August 6, 2014 at 10:53AM
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Don't forget to think about the extra little things that an existing home might have that a new home won't or might not have. Things like mature or more landscaping, blinds, closet organizers etc. These things add up. Also, is there an HOA and what are the dues? Are they the same for all areas?

    Bookmark   August 6, 2014 at 8:31PM
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