Bet on Country Club

No More New Construction?

Buy land. They're not making it anymore.

--Mark Twain

Twain was clearly wrong about land (and real estate generally) always being a good investment; when credit is cheap and demand strong, prices can and do reach unsustainably high prices.

However, his basic insight -- look for something where supply is constrained -- is still right.

Which part of the Twin Cities housing market best fits that description today?

My candidate is new construction in Country Club, the tony Edina neighborhood just northwest of 50th & France (and east of 100).

Limited Supply

Country Club has just over 500 large, very well-built homes constructed mainly between the two World Wars.

Thanks to its historical designation, no home built there before 1944 can be torn down and replaced.

On top of that, Edina and Minnesota have enacted increasingly rigorous requirements for new construction, governing everything from setbacks and variances to maximum lot coverage (ironically, many of these restrictions were a response to go-go construction a couple years ago, and are now becoming law as the new construction tide is very much going out).

Bottom line: if you want a new(er) Country Club home . . . you're going to have to buy one that already exists.

Edina Country Club Trivia

Where Are All the Garages??

Guess which of the following statements about the Country Club district in Edina are true:

A. Fruit trees may not be planted on the boulevards
B. Country Club is known for relatively small lots
C. Front-loading garages were originally prohibited (and are still rare).
D. Homes in Country Club cost more than $1 million.

Answers: all true except D.

While the majority of homes do sell for more than $1 million, there are now a few on the market for less than that.

Bonus question:

What was the putative reason for the small lots? (Developers always have an economic incentive to build more house on less land.)

So that residents would congregate at the country club to socialize, not in their backyards.

Thanks to Edina Realty's Andrew Olive for the above.

P.S.: if you are a non-Minnesotan reading this blog, Country Club is one of the Twin Cities' toniest neighborhoods, known for its gorgeous, immaculately kept Colonials, Tudors, and Federal-style homes (like the one pictured above). The historically designated district has about 540 homes in total.

As you may have already guessed, Edina is the Twin Cities suburb where Edina Realty originated . . . in 1955.

Picking Comp's: Vertical or Horizontal?

What's it Worth? Who Wants to Know?

Pricing well is one of the most important skills a Realtor brings to the table.

In turn, that depends on knowing which "comp's," or comparable sold properties, to choose.

As defined by both Realtors and appraisers, the comp's are the three homes most similar to the "subject property" -- in terms of style, age, square feet, condition, etc. -- that have sold the most recently.

Once you've identified three homes, step 2 is to go through a "compare-and-contrast" analysis juxtaposing each comp with the subject home, adding or subtracting to adjust for the differences (How much? That's another "experience" judgment).

"Vertical" vs. "Horizontal" Selection

By convention, "recently" used to mean the last six months. However, as underwriting standards have tightened in the wake of the housing bust, some banks now insist on three months.

But what if there aren't three good comp's within the last few months? Or even one comp?

That's where it gets interesting.

Appraisers, working for the lender, will typically stick to the shorter timeline and simply look as far afield as necessary to find three similar homes. Call that "horizontal" selection.

By contrast, a good Realtor who knows the area will opt to choose the comp's "vertically," i.e., stay within the immediate neighborhood, and go back as far as necessary to find good sales precedents.

Guess which approach is more accurate?

Inside Information

The latter, because a Realtor who knows the chronology of local neighborhood sales can "connect the dots" going back as far as necessary.

They'll know which homes sold fast, which sold slow, which sale prices were aberrations -- and why.

Armed with that info, they'll have a feel for momentum (or lack thereof) . . . . and can price accordingly.

By contrast, bank appraisers invariably end up comparing geographic apples to oranges.

In their quest to find timely comp's, they'll jump significant -- but invisible -- neighborhood boundaries that render comparisons much more difficult.

Just in Minneapolis and the west suburbs, I can think of numerous, contiguous neighborhoods where you'd never compare a home in one neighborhood with one in another.

Country Club vs. Morningside

To pick just one example, consider Edina's Country Club and Morningside neighborhoods.

Both wonderful neighborhoods, they each have their own characteristic housing stock, supply and demand -- and per square foot selling prices.

Confusing two, disparate areas often leads to homes not appraising when they should -- or Sellers not pricing their homes appropriately.

Upper Bracket "Spec Homes"

"Great Room Lite" (And Other Trends)

Where: 4615 Wooddale (in Edina's Country Club neighborhood)
What: new Federal Colonial Revival with 5BR/6BA and over 5,000 FSF
How much: asking price - $1,995,000
When: on market now
Who: list agent - John McDonald; broker - Edina Realty

One of the fun things about upper bracket "spec homes" is that they collect -- under one roof -- all the latest trends, not to mention lots of fun bells & whistles (if you don't know, "spec" means speculative, as in "build it and they will come").

The home featured at today's Exceptional Properties meeting, 4615 Wooddale in Edina's Country Club neighborhood (pictured above), had on display a laundry list of current (and future?) Buyer favorites:

--"Great Room Lite" concept: Combination Kitchen-Family Room-Den; Dining and Living Rooms are laid out more formally.
--Upper level laundry
--Lower level with 9' ceilings (standard is 7'); in-floor heat
--Built-in radon remediation (according to the builder, the cost to install new is $800, vs. $2k-$3k for retrofitting)
--Big, flat panel TV's . . . . everywhere (above fireplaces, bathroom vanities, etc.)
--"Marmoleum flooring" (an all-green variation of linoleum)
--Picture rail moldings . . . on the ceilings! Several rooms used this to define sitting areas directly below
--Lots of bathrooms. In fact, three of the four upstairs bedrooms had private Baths

In addition to all of the above, the home had a "HERS" rating of 52 (that stands for Home Energy Rating System). Even though the range is from 0-100, apparently 52 is a very good score (steep curve!).

And though the illustration above doesn't show it, in the builder's words, the home "scales nicely" with neighboring homes. In other words, it blends in -- style-wise, size-wise, etc. -- rather than sticks out, like so many McMansion's do.

So how much does all this luxury cost in a brand, new 5,000 FSF home in the middle of tony Country Club?

Asking Price is $1.995M.