Most Expensive House?

In this thread in the Pit, FairyChatMom said:

Is there in fact such a rule? What is the reasoning behind it?

Thre resoning, I believe… whether valid or not… is that if you own the most expensive house on the block other houses will appear better bargains by comparison and may will probably sell better/faster… especially if there is a big disparity between your expensive house and the least expensive house.

Also, the most expensive house will stand out from the rest in the neighborhood which may make it seem out of place.

I always bought houses that were not the most expensive on the block and as people bought or built more expensive houses than mine it seemed to pull the value of my house up faster… I think it may be a myth except if you live in a $1.5M house and the average for the neighborhood is $500K. I’m sure a real estate agent will chime in soon with a better answer.

As dolphinboy pointed out, it has to do with re-sale value. All the houses in a neighborhood get pulled towards the middle, in terms of value. So, if you own a $400,000 house in a $350,000 neighborhood, and you put $100,000 worth of work into your house, it will not be worth anywhere near $500,000.

On the other hand, if you own a $400,000 house in a $800,000 neighborhood, and you put $100,000 into your house, it may end up being worth more than $500,000.

Also, in a down market, (yes, down markets happen on occasion), the higher end houses in a neighborhood tend to get hit harder. Since most people, in effect, buy their houses on margin, a modest 5% drop in real estate prices can wipe out half their investment.

Thus, the nicest house in a neighborhood is (generally speaking) a riskier investment.

The house next to my parents house is on the market right now. It can probably be had in the range of $12-15 million dollars. It last sold for $11 million IIRC. Minor detail, the house isn’t finished yet. By all accounts, there is currently between $20-30 million in the structure and land. The house was being built by the former CEO (and president?) of PageNet. Construction started when the stock was sky high. The stock dropped like a stone and the CEO was axed by the BoD.

Was it the nicest house on the block? Doubtful, but it is damned sure the most expensive one. That is saying a lot for a street with a few billionaires in Dallas, where conspicuous comsumption is a life style.

I’d always heard a variation on this theme:

“Try to buy the cheapest house in the best neighborhood” I suppose the reasoning being much the same as listed in this thread.

In addition to the reasons already pointed out, the most expensive house in the neighborhood is also the least liquid, i.e. it will take the longest to sell.

The Michigan home where Madonna spent her childhood is currently being auctioned on eBay.

The average price of a house in the area is $140,000. The house was last sold by Tony Ciccone in July 2000 for $269,924.

25 prospective purchasers are engaged in a bidding war at the moment, the latest bid being in excess of $2 million.