# How much of real estates value is due to location **URL:** \ **Category:** Factual Questions\ **Created:** [January 11, 2005, 11:17pm UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287 "2005-01-11T23:17:15Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![Wesley\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wesley_clark/32/20581_2.png) [@Wesley\_Clark](https://boards.straightdope.com/u/Wesley_Clark)\ **Post date:** [January 11, 2005, 11:17pm UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287/1 "2005-01-11T23:17:15Z")
I was looking at real estate in high cost areas like San Francisco and lower cost areas like the 3 million square miles of the US between california and new england and the cost varies greatly for similiar homes, sometimes one would be 20x more expensive in SF for a comparable place. Not only that but those homes in SF may have been in the ghetto, so its not exactly prime real estate. So how much of a home or condos costs is due to location when you compare the best location vs the worst location? Is it about 98% for the location and 2% for the actual house? ---
**Author:** ![samclem](https://avatars.discourse-cdn.com/v4/letter/s/a9a28c/32.png) [@samclem](https://boards.straightdope.com/u/samclem)\ **Post date:** [January 11, 2005, 11:28pm UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287/2 "2005-01-11T23:28:57Z")
It’s only the dirt that’s expensive. The house cost is the same, essentially. ---
**Author:** ![The\_Cat](https://avatars.discourse-cdn.com/v4/letter/t/b9bd4f/32.png) [@The\_Cat](https://boards.straightdope.com/u/The_Cat)\ **Post date:** [January 11, 2005, 11:32pm UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287/3 "2005-01-11T23:32:09Z")
Well I’ll tell you that in Montana my parents bought a 5 bedroom 3bath house with 2 acres of property for 150,000 dollars. In portland oregon where I live now a 2 bedroom condo can cost over 100,000 dollars and a 5 bedroom house can cost up to a half a mil or more. So location has a LOT to do with housing prices. ---
**Author:** ![Wesley\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wesley_clark/32/20581_2.png) [@Wesley\_Clark](https://boards.straightdope.com/u/Wesley_Clark)\ **Post date:** [January 12, 2005, 12:06am UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287/4 "2005-01-12T00:06:42Z")
> [@samclem](#): > > It’s only the dirt that’s expensive. The house cost is the same, essentially. Yep. In SF A 400 sq ft. 1 bedroom condo in the ghetto built in 1900 was about 200k. In rural indiana a 400sq ft house is about 10k, and that is a house with a yard. A condo in the same location may be about 5k. ---
**Author:** ![gazpacho](https://avatars.discourse-cdn.com/v4/letter/g/6f9a4e/32.png) [@gazpacho](https://boards.straightdope.com/u/gazpacho)\ **Post date:** [January 12, 2005, 12:12am UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287/5 "2005-01-12T00:12:27Z")
> [@samclem](#): > > It’s only the dirt that’s expensive. The house cost is the same, essentially. I really don’t think that this is true at all. If I had an empty piece of land in SF and one in rural Indiana I am quite sure that I could get similar houses built for less in Indiana. Labor is cheaper in Indiana. I would not be surprised if materials were also cheaper in Indiana. ---
**Author:** ![samclem](https://avatars.discourse-cdn.com/v4/letter/s/a9a28c/32.png) [@samclem](https://boards.straightdope.com/u/samclem)\ **Post date:** [January 12, 2005, 12:39am UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287/6 "2005-01-12T00:39:32Z")
> [@gazpacho](#): > > I really don’t think that this is true at all. If I had an empty piece of land in SF and one in rural Indiana I am quite sure that I could get similar houses built for less in Indiana. Labor is cheaper in Indiana. I would not be surprised if materials were also cheaper in Indiana. I’m sure you’re correct. Let me ammend my statement. In many California cities, a lot that is buildable might cost $500,000. To put up your house, you may spend $100,000 more. The same size lot in a major urban Indiana setting might cost $60,000. And the cost to errect an equivalent house might be $80,000. But the dirt is the major cost difference, not the savings in labor or materials. ---
**Author:** ![spingears](https://avatars.discourse-cdn.com/v4/letter/s/ebca7d/32.png) [@spingears](https://boards.straightdope.com/u/spingears)\ **Post date:** [January 12, 2005, 2:55am UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287/7 "2005-01-12T02:55:40Z")
Like so many things, it all depends. Land and dwelling structure. Market conditions. Supply and demand rule, having a big effect on other factors. ---
**Author:** ![CookingWithGas](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cookingwithgas/32/485_2.png) [@CookingWithGas](https://boards.straightdope.com/u/CookingWithGas)\ **Post date:** [January 12, 2005, 3:00am UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287/8 "2005-01-12T03:00:45Z")
. . .But it must be said. Real estate agents always say there are only three things that matter in real estate: 1. Location 2. Location 3. Location ---
**Author:** ![Xema](https://avatars.discourse-cdn.com/v4/letter/x/9de053/32.png) [@Xema](https://boards.straightdope.com/u/Xema)\ **Post date:** [January 12, 2005, 4:00am UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287/9 "2005-01-12T04:00:21Z")
> [@CookingWithGas](#): > > Real estate agents always say there are only three things that matter in real estate… Next time they tell you that, ask them whether the presence of, say, PCBs in the back yard might have an effect on the price of a house. ---
**Author:** ![don\_t\_ask](https://avatars.discourse-cdn.com/v4/letter/d/e68b1a/32.png) [@don\_t\_ask](https://boards.straightdope.com/u/don_t_ask)\ **Post date:** [January 12, 2005, 4:07am UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287/10 "2005-01-12T04:07:23Z")
I’m pretty sure that when they say location, location, location they mean don’t pick a location with PCB problems. ---
**Author:** ![Alvis](https://avatars.discourse-cdn.com/v4/letter/a/c89c15/32.png) [@Alvis](https://boards.straightdope.com/u/Alvis)\ **Post date:** [January 12, 2005, 4:39am UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287/11 "2005-01-12T04:39:37Z")
> [@gazpacho](#): > > Labor is cheaper in Indiana. I would not be surprised if materials were also cheaper in Indiana. Ah, what a cycle! Housing costs are low, so lower wages are necessary to maintain quality of life, so labor expenses are low, so houses cost less to build… ---
**Author:** ![OxyMoron](https://avatars.discourse-cdn.com/v4/letter/o/e9a140/32.png) [@OxyMoron](https://boards.straightdope.com/u/OxyMoron)\ **Post date:** [January 12, 2005, 5:05am UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287/12 "2005-01-12T05:05:18Z")
There’s an interesting flip side to this - buying a house _without_ buying the land is generally a bad deal. Sound odd? I’ve just described a mobile home. There was an interesting article on this in the NY Times Magazine a couple of years ago. I had never quite thought through that because mobile homeowners usually only buy the home, and not the land it sits on, they don’t get a very good economic deal. Generally speaking, for any home, only the land bit appreciates - the house itself depreciates. With a regular house, the land appreciation more than makes up for the house depreciation. But in a mobile home, the value goes down as soon as the owner moves in. That means the mobile homeowner isn’t creating investment value and won’t be able to “trade up” just on the basis of his home value. He’s really more like a renter, just with a tax deduction. ---
**Author:** ![kniz](https://avatars.discourse-cdn.com/v4/letter/k/c37758/32.png) [@kniz](https://boards.straightdope.com/u/kniz)\ **Post date:** [January 12, 2005, 7:36am UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287/13 "2005-01-12T07:36:12Z")
> [@The Cat](#): > > Well I’ll tell you that in Montana my parents bought a 5 bedroom 3bath house with 2 acres of property for 150,000 dollars. In portland oregon where I live now a 2 bedroom condo can cost over 100,000 dollars and a 5 bedroom house can cost up to a half a mil or more. > > So location has a LOT to do with housing prices. I have a 5 bedroom, 4 bath on 2 acres in rural Mississippi that is worth well over $200,000. I think your parents must have stolen that house in Montana. On the other hand I can’t imagine getting a house in Portland with 2 acres for just half a mil. > [@samclem](#): > > In many California cities, a lot that is buildable might cost $500,000. After watching the news about the mudslides, it seems to me that they use lots that aren’t buildable in California and I bet they ain’t cheap. :eek: ---
**Author:** ![Crafter\_Man](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/crafter_man/32/458_2.png) [@Crafter\_Man](https://boards.straightdope.com/u/Crafter_Man)\ **Post date:** [January 12, 2005, 12:43pm UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287/14 "2005-01-12T12:43:21Z")
The price of real estate is solely based on supply and demand. ---
**Author:** ![Balthisar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/balthisar/32/2825_2.png) [@Balthisar](https://boards.straightdope.com/u/Balthisar)\ **Post date:** [January 12, 2005, 3:11pm UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287/15 "2005-01-12T15:11:40Z")
Interesting… I just looked up the tax records for my current house and my previous house. Using the state assessed value for the land portion (not the structure portion), my previous home has land valuated at $5.09 per ft^2, while my current home is valuated at $3.00. This kind of suprises me, since the old place is two-income-to-get-by-middle-class, tiny, tiny little lot, but no crime to speak of beyond kiddie “taggers” kind of place. They were all post WWII cookie-cutter ranches with no basement. People had their classsic cars in the garage, on blocks, waiting for a paint job. Nice place, but not _nearly_ as nice as where we are now: rural-ish, larger house with modern amenities, great neighborhood, and a little bit higher up in the middle class, and the classic cars are fully restored and get taken out every weekend in the summer. Even more so, it’s half and acre, which is really, really hard to come by. On the other hand, I’m not really all that suprised. This house cost us twice as much as we sold the old place for. But it’s really way, way more than twice the land, house, neighborhood, and quality of life. The difference, of course, is the land value. I’ll say that while looking in just the four county area surrounding Detroit (but never in it!), what you could get for my budget varied from a virtual palace in depressed areas, to really depressed houses in exclusive areas. There’s as much variety in this small section of the state as the examples I’m seeing in this thread for all across the country. ---
**Author:** ![JerH](https://avatars.discourse-cdn.com/v4/letter/j/bb73d2/32.png) [@JerH](https://boards.straightdope.com/u/JerH)\ **Post date:** [January 12, 2005, 10:02pm UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287/16 "2005-01-12T22:02:45Z")
When I bought my house (about a year ago), part of the appraisal was dividing out the cost of the land (because we only have to insure the house, not the land it’s on). In Alexandria, VA, the house was valued at about $110K, and the land it sits on was around $180K. I think if the ratio gets much higher, I’m going to start seeing a lot of houses being bought primarily for their land, and the $100K houses getting torn down and replaced with ones 2 or 3 times as large (since the lots can hand a lot more house than it actually on them). ---
**Author:** ![iamthewalrus\_3](https://avatars.discourse-cdn.com/v4/letter/i/258eb7/32.png) [@iamthewalrus\_3](https://boards.straightdope.com/u/iamthewalrus_3)\ **Post date:** [January 12, 2005, 11:26pm UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287/17 "2005-01-12T23:26:44Z")
> [@kniz](#): > > After watching the news about the mudslides, it seems to me that they use lots that aren’t buildable in California and I bet they ain’t cheap. :eek: The mudslides were just a bit south of where I live, and I assure you that the land there is _incredibly_ expensive. I’ve basically given up on ever buying a home here because the prices are so high. We’re talking $400K+ for a one-bedroom 700 sq ft. house. ---
**Author:** ![Wesley\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/wesley_clark/32/20581_2.png) [@Wesley\_Clark](https://boards.straightdope.com/u/Wesley_Clark)\ **Post date:** [January 13, 2005, 12:38am UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287/18 "2005-01-13T00:38:20Z")
> [@iamthewalrus(:3=](#): > > The mudslides were just a bit south of where I live, and I assure you that the land there is _incredibly_ expensive. > > I’ve basically given up on ever buying a home here because the prices are so high. We’re talking $400K+ for a one-bedroom 700 sq ft. house. Farmland still beckons my friend. ---
**Author:** ![Valgard](https://avatars.discourse-cdn.com/v4/letter/v/7feea3/32.png) [@Valgard](https://boards.straightdope.com/u/Valgard)\ **Post date:** [January 13, 2005, 1:04am UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287/19 "2005-01-13T01:04:38Z")
> [@JerH](#): > > When I bought my house (about a year ago), part of the appraisal was dividing out the cost of the land (because we only have to insure the house, not the land it’s on). In Alexandria, VA, the house was valued at about $110K, and the land it sits on was around $180K. I think if the ratio gets much higher, I’m going to start seeing a lot of houses being bought primarily for their land, and the $100K houses getting torn down and replaced with ones 2 or 3 times as large (since the lots can hand a lot more house than it actually on them). Ditto. I own a home in the SF Bay Area in a nice, but not “hot”, neighborhood. I don’t have the appraisal in front of me but the value of the lot (I think it’s a standard 5000 square foot lot) was enormous compared to the construction cost of the home, like nearly $400k for the land itself. The median home price in this area is about $500k and it’s out of reach of something like 87% of families. “Location, location, location” may be a cliche but there’s a lot of truth to it. ---
**Author:** ![jweb](https://avatars.discourse-cdn.com/v4/letter/j/71c47a/32.png) [@jweb](https://boards.straightdope.com/u/jweb)\ **Post date:** [January 13, 2005, 3:37am UTC](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287/20 "2005-01-13T03:37:59Z")
If we’re talking land for your living quarters, location is the main factor in price. If we’re talking farmland, it’s a whole different animal. Land that can produce the more crop/acre will be much more valuble. [Next page](https://boards.straightdope.com/t/how-much-of-real-estates-value-is-due-to-location/284287.md?page=2)