Home Buying in Morrisville>Question Details

Roulette, Both Buyer and Seller in Morrisville, NC

Do townhouses depreciate with their age? Or is more like they appreciate slower compared to newer ones?

Asked by Roulette, Morrisville, NC Sat Feb 20, 2010

Is there a co-relation between old and new townhomes in the same area with regards to price?

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This is not the market t be thinking of appreciation in real estate. You could buy now and see prices drop.

Normally speaking, any property (except for mobile homes) will appreciate in line with inflation as long as it is well maintained. However, we are now in a downturn in real estate values. So any property bought might go down in value. If this recessionary period continues it could be true for several years. It could turn around quickly. No one knows what to expect for price changes.

There used to be a price premium for a new house. In some places that seems to have disappeared. If that still exists it would suggest that a new one would lose more value in 12 years than a used one would.

Look below to decide if it makes more economic sense to rent or to buy. Use your numbers and find out.
0 votes Thank Flag Link Sat Feb 20, 2010
It's the value of the land that appreciates, not the structure. Structures deteriorate over time, and require reinvestment to maintain.
0 votes Thank Flag Link Sat Feb 20, 2010
Wendy - my apologies! When I started my answer, you had not posted yet!
0 votes Thank Flag Link Sat Feb 20, 2010
Roulette - as the other gentlemen have noted, this is a tough question to answer by this method of communication.

The short answer is "NO". You don't buy a townhouse or condo today and each year the value goes down as the unit ages.

The long answer is "yes, but..." with the "but" being many factors. Even a single family home - the home itself depreciates each year. Renovations or remodeling or future upgrades reset (at least partially) the depreciation "clock" (effective age). When a home is appraised, one of the methods used is called the Cost method. An appraiser says "what would it cost to build this unit new", and then they do depreciate the unit for the "effective age". The same occurs as an adjustment in the most important appraisal method - the Sales Comparison. If two similar floorplan units have sold for different prices, one of the appraiser adjustments is according to how updated (effective age) they are.

Even my above paragraph is a gross oversimplification of the answer. And I am by no means an appraiser - one of them may correct what I'm saying with a more complete discussion. The best way for you to better understand the issue is to sit down with your Buyer's Agent and let them show you the different values of different units and neighborhoods.

As has been mentioned - the MARKET value of a home depends more on location and desirable feautures of the home and the subdivision than how old or depreciated the home may be.
0 votes Thank Flag Link Sat Feb 20, 2010
Typically speaking overall, townhomes appreciate less than detached homes even if they're in a good location and kept in good condition. Even new homes can depreciate (which is why many new construction homes built back at the end of the peak of the market are now selling for less than their original purchase price); for example, I just helped a buyer purchase a townhome in a neighborhood that was built in 2006 and the original purchase price was around $200,000. It sold in 2009 for $187,500. I also have a friend who bought a new townhome in 2003 for around $137,000 and sold it in 2007 for $178,000 (both of these were in NW Raleigh, which is typically stable economically). When I lived in a townhome in Cary that was built in the 1980's, my purchase price in 2000 was around $100,000 and I sold it for $116,000 in 2007 (after updating it some). It's not a concrete answer because "it depends". You have to take current inventory into account, the location of the home, sales data of the neighborhood, etc. It could help to have an older townhome with updates near newer ones...the homes may offer similar lifestyles, but yours could be priced lower and therefore be more desirable for the first time buyers who are looking to cash in on the tax credit. Over time, there's no way to tell what will happen with home prices in certain neighborhoods. Our job as agents would be to help you find a home in an area with stability historically, but any investment, including a home purchase, has associated risks. It's important to work with an agent who's familiar with the area and who has a sense of history of it as well. Clear as mud, right ? It's always a supply vs. demand situation and neighborhoods that are hot now could depreciate later due to a number of unforseen factors. I hope that helps. Enjoy the rest of your weekend! Wendy
0 votes Thank Flag Link Sat Feb 20, 2010
Roulette, This really depends on location, amenities and style. All have a bearing on the desirability of the home. In our area, we have the ability to look up the appreciation rate for neighborhoods assuming there has been enough sales. This rate is compiled by an appraiser and can be obtained by your buyers agent. I would be glad to sit down and discuss this with you at your convenience. You can also go to my search engine referenced below and call up sold properties in your area or where you wish to move. Let me know how I can be of help.
0 votes Thank Flag Link Sat Feb 20, 2010
This is a tough question to fully answer as real estate in general historically "appreciates". Nonetheless the foremost point with respect to depreciation and value is LOCATION...LOCATION...LOCATION...

That being said, despite the physical property, the demand (or lack thereof) actually determines appreciation and depreciation. Age can play a role as other factors due, but location is king.

Your local Realtor can give you specifics on your local market.
0 votes Thank Flag Link Sat Feb 20, 2010
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