Page 3 - Build New or Buy or Renovate Existing Home
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Central Houston Background of High-End Housing Profile

As you know, most everything in real estate is about location, location, location. Home building is
no different, so we will restrict the location of our subject matter to Central Houston high-end
housing neighborhoods. Widely known, this area consists of mature, established neighborhoods
with very few vacant lots. The majority of available home building lots are the immediate result of
the demolition of existing homes. Builders and Developers closely monitor the older home values,
and when the land values reach a higher price than the improvements, the existing home becomes
what is known as a "tear down". Land values in this area have doubled in price the past 10 years.
The result of these increasing land values has yielded a rapid escalation in home valuations during
this same period. Home prices spiking, coupled with an aging housing inventory, has created high
demand for the limited supply of available home site lots. Land values are one of the main
components, over the long term, that keep housing prices elevated during economic downturns.

Again, our defined high-end market segment is very established. This segment consists of homes
built as early as 1930 and as recent as the date of this guide, although the average age of homes in
our specified area is 1978. The typical pre-1970 home was a one-story home on a 1/4 -1/2 of acre
lot. Post 1970 homes commonly became two-story homes built on these lots as replacement
homes. Many of these existing home lot sizes are restricted from being subdivided by deed
restrictions. The current price range for a future home site is between $1,000,000 - $2,500,000,
representing $40/sf in the west side of Memorial to $120+/sf in the River Oaks area.

Home values have risen between 80% to 100% in the past decade according to HCAD.org. This
would mean that a typical 3,000 sf home, priced at an average value of $500,000, would currently
be valued at $800,000 - $1,000,000. These price values represent the base price point for a lot.

The Land Evaluation Considerations

Constructing a new custom home begins with selecting a building lot. This can either be a lot that
someone has previously cleared and prepared for sale or the purchase of an older home for the
purpose of demolishing the existing improvements. The key to determining the building lot begins
with your personal financial qualification, which establishes your purchasing power.
Understanding your mortgage payment threshold is a simple qualification for your potential price
range in home values. This, in turn, will lead you to financially qualifying for the appropriate
neighborhoods you are considering. With this financial knowledge in hand, you can begin the
process of evaluating your options.

If you do not truly value for your existing home, or are not in love with your immediate
neighborhood, this becomes a fairly easy decision discerning new building verses remodeling. If
this is not the case, and the issue is that your home is undersized or out-of-date, you should

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