This isn’t just happening in California, in Austin lot splitting has been a thing for a while and the new houses that get built in the back yard of the old house often sell for as much as the original house would have.
It’s actually not hard to understand. People have a certain amount of budget per month they can afford, which converts into a certain mortgage value. Then they look for the neighborhood they want to be in, and whatever they can get inside that mortgage budget is on the table.
So they see two options:
Old house from 1960, 1800SQFT, 2 bathrooms, low ceilings, needs tons of renovation but has a nice big yard. $700k.
Same neighborhood. Brand new house. 2400 SQFT. 3.5 bathrooms. High end finishes. Almost no yard (it’s a half-lot). $700k.
Most of the people buying this are coming from rentals where they probably didn’t have a yard in the first place, and they are already stretching to the limit to afford anything so they won’t be able to remodel after purchase. So, no yard? No problem.
It’s actually not hard to understand. People have a certain amount of budget per month they can afford, which converts into a certain mortgage value. Then they look for the neighborhood they want to be in, and whatever they can get inside that mortgage budget is on the table.
So they see two options:
Old house from 1960, 1800SQFT, 2 bathrooms, low ceilings, needs tons of renovation but has a nice big yard. $700k.
Same neighborhood. Brand new house. 2400 SQFT. 3.5 bathrooms. High end finishes. Almost no yard (it’s a half-lot). $700k.
Most of the people buying this are coming from rentals where they probably didn’t have a yard in the first place, and they are already stretching to the limit to afford anything so they won’t be able to remodel after purchase. So, no yard? No problem.