I have a client that has a house that was constructed poorly back in 1994. I am designing the replacement house.

Are they selling their previous home or tearing it down?

Tearing it down (before it falls down or floats away).

Wow, Mark, what an ordeal and a waste for your clients. June, thanks for your thoughts about neighborhoods, that's kind of what I thought too.

They don't build 'em like they used to and that's a very good thing. Sure, 2x4s were really 2" x 4". Big deal. There was no fire stopping between them. People used to tumble down stairs when winders could essentially have a 28" rise at the apex.

Sure, there is some crap finish work. Defend our nation's borders from unfair competition and that will quickly stop.

Friends live next door to a new build (3.5 million ) and when they are in their back garden they hear their neighbours toilet flush.

So... How do people trade up and build wealth via home ownership?

You know, we're all told to get a starter home first, then sell/trade up to a nicer home, then sell up again, etc., until Retirement (which will be elusive for my generation, anyway).

Does this all depend on a younger/more ignorant generation buying my less-than-ideal tract starter home, so that I can trade up, and hope to be real-estate-successful, like the generation before mine?

Or was that boat only for a specific cohort of folks, and I'm up a creek...? Since quality has been shot, and everything, wrecking the system?

We've never been attracted to new developments. All our homes over 45 years of home ownership have been older ones in well-established neighborhoods. Older being from the 1920's, 1950's, '60's '70's, and only one in a single builder subdivision, that being the 60's. The established neighborhoods, schools, mature landscaping, all were prime factors in our decisions to buy the homes that we did. There are always glitches and maintenance in any home. But to buy in a brand new subdivision is just anathema to me.

Well, my parents and their brothers and sisters all did it that way, One Devoted Dame, but all the children got burned on their first houses, and they weren't even tract disasters. I don't know if real estate can be counted on to build wealth any more. Especially not when folks are spending money on new houses that age more like cars. Will there one day be house junk yards where you can go pick up a spare truss or two if you're handy, and where you can sell your house for a few bucks once it's beyond help?

Buy what you can afford and treat the mortgage payments as if they are rent and not a bank account that you can dip into. Sometimes you win and sometimes you loose.

Buy a small old house and live a small thrifty life in it. Not saying you can’t have nice things, but don’t buy into the eternal dissatisfaction with what you have in favor of the latest and greatest. Buy good quality, and you can have a lifetime purchase. My grandmothers house had the same metal cabinets in it until she went to the care home. The sleeper sofa lasted 30 years, and went to her housekeeper. There was no “redecoration” to the new fads every couple of years. Tune out advertising.

I sometimes feel these threads turn into - "everything was better back then threads".

My in laws built a house in 1973. They added on and still live there. They have a crawlspace with not even plastic on the ground. Not even inadequate plastic but bare earth. They have several $10k quotes to just bring the crawl up to modern code - ie not encapsulating - just remediating. Removing moldy insulation etc. They have just replaced their windows. Their kitchen is new. Their floors still creak and the house leaks like a sieve - which makes for dry winters and humid summers.

I have a 83 rental house. The prior owners had replumbed the house - replaced the polybutylene mess. As well as lots of other replacements of major issues - windows etc.

None of these examples are to excuse the poor quality tract home - just saying that all older houses have issues too. What happens to the poor quality is a greater number of repairs as the house gets older. These repairs sting but also represent a relatively small financial burden compared to house value.

There are advantages to older houses and advantages to newer. Code advances over time. Certain products that turned out to not have longevity are gone - Masonite siding, certain electrical panels and wiring types, polybutylene plumbing etc.

Older homes for sure have straighter and better lumber - but often less of it.

But back to the original question - you repair older homes and throw them away only when the value of the land significantly exceeds the build value. We just tore down a 1950s house - I challenge anyone to think it was built with such amazing quality and I also challenge anyone to choose to live in it today for the land cost. I suppose when a neighborhood gets ready to be torn down, you stop repairing things for a decade...

Well, my parents and their brothers and sisters all did it that way, One Devoted Dame, but all the children got burned on their first houses, and they weren't even tract disasters.

This is mostly what I've seen, too.

I'm at the tail end of GenX, and it seems that my fellow young Xers and old Millennials are *not* able to do as the (mostly older and middle) Boomers did. The housing stock we can choose from, with little resources in the beginning, is, well, junk.

I don't know if real estate can be counted on to build wealth any more.

I'm starting to think this is the case, too. Which means I can't really take the advice of the generation before mine, because it doesn't apply. Seems they just got lucky, being born at the right time.

Especially not when folks are spending money on new houses that age more like cars.

...With very little choice in it! I mean, we all want a house with good bones, in a great location, etc., but finding anything and beating others to it is a game of chance.

I recognize that a large part of the problem is that I have been an adult in 2 major metro areas that experienced explosive growth *right as I was trying to buy a house* -- which artificially inflates prices, reduces build quality, and knocks out the folks without as many resources -- but as a teenager, it's not like anyone older and wiser said to me, "Hey, you know, Phoenix is waaay overpriced. Move to Boise to raise a family, before a million older, established Californians do, and make a life for yourself right out of high school."

Instead, it was "get a house NOW -- any house -- because if you don't do it while rates are this low [6% at the time], you'll never be able to afford one" and "drive 'til you qualify" so that young couples end up in the middle of suburban neighborhoods outside city limits. Neighborhoods that are the first to crash when recessions hit. And they lose jobs they've had for 10 years. No job, no equity, no fun.

Will there one day be house junk yards where you can go pick up a spare truss or two if you're handy, and where you can sell your house for a few bucks once it's beyond help?

That is insanely depressing, lol.

But maybe it means I can buy each neighbor's house on either side of me for a few handfuls of cash, tear them down, and smash our lots together so that my property will be 3/5ths of an acre. Once the useless HOA is dismantled, of course.

A house is never as good an investment as investing. If you are looking at it that way, stick your money in a mutual fund that tracks the S and P 500 and over the long haul, you’ll do better with the market

Many (not all!) builders will save themselves a few pennies on something that will cost an owner many dollars to fix in the future. That is something difficult to see before buying even with an experienced home inspector.

A first house isn’t an investment. You’re lucky it isn’t a money pit. A first house is a learning opportunity to develop DIY skills that every homeowner needs. I highly recommend old and decrepit and not in a good neighborhood as a advanced course in adulting.

Yes, plenty of people fail that adulting class. That is usually because they got inadequate prerequisites. They don’t understand delayed gratification and want to skip to the graduate course barbie dream house without doing the interim work and suffering a little.

I bet if someone did a post on everyone’s first house, there’s be a common theme of it not being new, not being in great shape, and being one of the biggest learning experiences they ever had. There wouldn’t be a lot bragging on how much money they made buying it. Because that’s not what owning a house is actually about.

A first house isn’t an investment. [....] There wouldn’t be a lot bragging on how much money they made buying it.

This is very interesting! It runs counter to nearly everything I have been told about buying houses; it would've been nice to be introduced to this idea/reality 20 years ago, so that expectations could've been pragmatically set. Instead, we were told to buy a house in the best neighborhood we could afford, and compromise on/forgo interior pretties, furnishings, etc., then trade up every 5-15 years. With our first house, I had every intention of staying there for 15 years. Recessions, job losses, and moving to where the jobs are, have all translated to being unable to follow that plan.

I don't think I'm alone in this, which is unfortunate. My circle is, admittedly, fairly small, but I don't personally know anyone with the Instant Gratification Barbie Dream House Syndrome, lol.

Good discussion.

Again a house is a lousy investment

Will there one day be house junk yards where you can go pick up a spare truss or two if you're handy, and where you can sell your house for a few bucks once it's beyond help? Those that posted this have not gone to a Habitat for Humanity store nor some of the architectural salvage places. Perhaps it is just this area but they have been around since the 1980s.

"What happens to poor quality homes?"

One of the HGTV shows rebuilds the kitchen and living room and the owners get new furniture.

Sometimes even what appears to be good quality does not lead to a high selling price. My husband loved this house from afar for several years. Started as a 50s all brick ranch and built on. Oldest part had 18 inch joists with the newest 12 inch. Anderson windows from the 1960s. Finished basement. Then a couple of years ago this area had a 13+ inch rain overnight and the basement flooded. Removed everything and only one wall had a crack. As the ground dried all of the walls developed cracks. To actually fix rather than to do cosmetic work is about what I would be able to sell this place for. Luckily none of the walls are bowing so any repairs could be put off. So am doing what I want knowing that the value of this house is in the land not the house.

maifluer03, I have utilized Habitat Restore as both shopper and donor....however, I was thinking on a rather larger scale than what I'm aware of there...I've seen fixtures, windows, doors aplenty, but drywall that cracks due to settling that could have been prevented, insulation that has to be ripped out and redone after moisture seeps in.... that's what I'm wondering about. How many of the junk-built houses of any age (recognizing that there were some being built at every stage, they just seem more common now) will eventually be demolished? If they are, how much of the material can be saved and reused? And if an owner is determined to save one, how can that even be done?

Well, my first house was a townhome. Built like junk to some extent. Made $10k in the 3 years I held it with zero down and a mortgage payment just a little more than my prior rent. One hot water heater and some DIY work. Overall, with zero down, an amazing ROI.

Second house had same down payment (although it was a new tract and I suspect I used my $10k on options/deposit). Sold it a few years later for $60k profit.

So my first 2 were not well built and I made money. With an infinite ROI if you count money down.

So I would never say never.

I just checked that neighbor hood. 2001 tract house. I paid $290k. Same floor plan is $500k. So not a great investment but not horrible either. I did far better in my 4 years of holding it.

3rd house. 1993 custom. Made $80k - good amount of sweat equity.

4th house made essentially zero in 8 years of holding it. Was nicely custom built in 2010.

My only point is that the quality of build does not predict the quality of the investment. The return is mostly luck and eclipsed by the S&P. That being said, there is a tax benefit on the gains and you can't live in stocks.

A house can certainly be a good investment. We've made much more money on property investments than equities. We've bought and sold many types of properties in California and out of the USA (Mexico) and made huge profits. Real estate can be a good good investment. In CA, the primary investment is the land, but depending on condition of the built house values can escalate.

This was built mid 40s while materials were still in short supply. The foundation was shallow but was typically allowed until the mid 70s and the slab was thin. Cinder block walls were hollow & unreinforced and when hit by the excavator (including 2 chimneys) it fell over quickly.

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"They don't make them like they used to" thankfully. Most surviving homes we see were the larger and nicer homes, as many cheaply built bungalows pre mid 1950s have long been removed.

Foundations built on stable soils and a well maintained roof are significant factors in the survival of older housing stock.

This area has districts that were all Sears or Wards Kit built houses that are standing up very well thank you. Many of the ones built post WWII are long gone.

In my area they become rent houses.

Real estate is a good investment if you know what you are doing. It is a big “if” and takes time and effort to learn. My not wealthy parents were great at it. One of the big things they did was wait, sometimes many years, for the location, size, price and condition house they wanted and could afford while living within their means, including savings. My Dad became a great DIYer and my Mom developed an eye for interior decorating and landscaping. I still remember sobbing at age 12 when we moved from our tract neighborhood to a small MCM house in one of the best areas of a large southern city. It had trashed hardwood floors, hideous paint, a metal cabinet kitchen where the flooring had warped and buckled the peninsula to a 45 degree angle and a mostly dirt yard. What really stuck in my mind was how incredibly excited my parents were they had finally found what they were looking for. During their lifetime they also built a tiny weekend lake house with the help of friends, purchased a small cabin in the mountains with a to die for view of the Blue Ridge and the New River, retired to a beach house, purchased and redid my grandparent’s house and then purchased a small MCM house in the best neighborhood in that city. I believe it is now more difficult to do what they did, but I think it is still possible.

One aspect that must be discussed is waste as a consequence of the poor design, and the damage to the environment. If anyone is interested here is a link "Why we need to rethink how we build homes" Ged Finch at TEDxWellington Sep-10-2019: https://www.youtube.com/watch?v=5RrEJMMiI9w

When I was at school studying construction, I was told to never buy a house less than 7 years old because the things that are going to fail will fail within 7 years, and then you know what you are up against as far as repairs or quality of workmanship. I have never bought a never home but this seems to make sense to me.

The same thing that happens to any home when there is a higher and better use for the land. "Quality" has nothing to do with it.

10 West 54th Street Manhattan, c. 1912

Source

Take the eight-storey mansion completed by John D. Rockefeller Jr (father of Nelson) on W. 54th St. Manhattan in 1912. By the 1920s the neighbourhood was going downhill with speakeasies and brothels proliferating. So just 25 years later, Jr., an art afficionado, tore it down and it became the site of the sculpture garden of the Museum of Modern Art (MOMA), the vision of his wife Abby.