What It Actually Costs to Maintain An Older House (a personal testimony):

*thread to follow*

1) We read a lot in the national media about overheated, high-priced real estate markets. But most Americans don't live in these markets. A lot of them live in places with the opposite problem - property values that are too low.
2) The median sales price of a house in the City of Akron is $64,000. Many houses sell for $40,000 or less. And these prices are actually high compared to Cleveland, Detroit, Flint, or Youngstown.
3) Sometimes people hear about these low prices, and they talk about what a bargain they are. Most people who say this have never owned an older house, and have unrealistic expectations about what it actually takes (in terms of time, money, and effort) to properly maintain it.
4) People have proposed many well-intended, but unrealistic, solutions to the problem of low property values in urban neighborhoods with older houses that are falling apart.
5) It has been suggested to me, on more than one occasion, that ***indebted***, college-educated Millennials could be lured back to the city by selling them these old, poorly-maintained houses for $1, and having them “fix up the house”.
6) People who say this do not have a realistic idea of what “fixing up” an old house entails – neither in terms of the scope of the rehabilitation work that would be required, nor in terms of the level of skill, time, and/or money needed to do the work.
7) Even in a low cost-of-living market like ours, $40,000 houses are generally not a “good deal”. They are almost always a liability. They are a ticking time bomb of deferred maintenance. They are an albatross.
8) When a neighborhood gets to be around 50 years old, it reaches a crossroads. The patina of newness has completely worn off. The houses are now well into their second life-cycle of exterior maintenance, and many are in need of significant and costly interior updates.
9) Will existing homeowners be willing to shell out the money for needed upgrades, or will they sell cheap, and move on to greener pastures? The answer to that question depends a lot on anticipated resale value, and can determine the fate of the neighborhood.
10) The value of comparable neighboring properties, as well as speculation about the future condition of the neighborhood, determines resale value. In the end, it comes down to supply and demand.
11) Approximately 25% of Akron's neighborhoods are comprised of homes that sell for $100,000 or more. I live in one of them.
12) There is a house right around the corner from me that sold for $12,025 in 2015. It was a foreclosure, and the entire foundation needed to be replaced.
13) Someone bought it, replaced the basement, put on a new roof, new siding, new windows, built a front porch, and sold it for $135,000 in 2018.
14) Why? Because houses in this neighborhood typically sell in the $125,000 to $150,000 range. If property values were less than that, that house would have been demolished. Instead of a nice-looking, renovated Cape Cod, we’d have an overgrown vacant lot.
15) Thanks to Mayor Horrigan's citywide property tax abatement program, there over 1,000 units of new housing in development (up from 10 in 2015).
16) Many of the new houses are in the $180,000 to $250,000 range. Some people see these prices, and instead of seeing it as a good thing, they see it as a bad thing.
17) They compare a brand-new $200,000 house to a 100 year-old house that costs one-third of that, and say “This is Akron…that’s way too much!”
18) People who say that don’t understand real estate market economics. They are comparing apples to oranges. When you factor in what it costs to properly maintain an old house and compare that to a maintenance-free new house with a tax abatement, the price gap disappears.
19) Here’s a personal example. My house, built in 1947, is 72 years old now. I bought it back in 2003, and have owned it for nearly 16 years. It is currently valued by the county fiscal office at around $100,000.
20) I tallied up what I spent on renovations over the past 15 years (this includes exterior features, core systems, structural stuff - not painting, routine plumbing/electrical, flooring, etc.)

The price tag?

21) This works out to an additional $502 per month, above what I was paying in mortgage, taxes, and insurance.

When you add all of that together, the total monthly cost works out to $1,439.
22) My house is attractive and in extremely good shape, but keeping it that way has come at a significant price. I'm fortunate that I'm in a position to be able to maintain it to this standard. Most people are not.
23) I mentioned that my house is valued at just about $100,000 by the county fiscal office. Now, let’s compare that to a newly-constructed house in the City of Akron, valued by the county fiscal office at $200,000.
24) The brand-new house will have a much higher mortgage payment, but it will have no initial maintenance costs, and it will also receive a 100% property tax abatement, meaning that the owner will pay no taxes on the value of the dwelling for the next 15 years.
25) The total monthly cost for the brand-new house that is valued at double what mine is?


Which comes out to exactly $5 per month more than my 72 year-old house.
26) The older house will cost you less money up front, but it also going to cost you a lot more money in maintenance and home improvements.
27) The older house will have more “character” (hardwood floors, wood-burning fireplace, etc.) but it will also be a lot more hassle to maintain, in terms of time (if you’re handy, and if you have it), or in terms of money (if like me, you’re not handy, and don’t have the time).
28) The thing with home maintenance is that ultimately, none of it is optional. You can let it slide for a while – until you can’t. At that point, you either figure out how to pay for it, or if you can’t, or won’t, you walk away, and it becomes your community’s problem.
29) The other thing: routine home maintenance doesn’t scale with the value of your home. Putting a new roof on a $1,000,000 house in San Francisco is not going to cost you that much more than it would cost you to put a new roof on a $40,000 house in Akron.
30) The difference is that the roof in San Francisco might represent 1% of the value of that property, while the roof in Akron might represent 25% of the value. It doesn’t take many repairs like that in a market like Akron before you’ve eclipsed what the house is even worth.
31) My house is around the 80th percentile in home value in Akron. What about the houses at the 20th percentile? The return-on-investment just isn’t there. That’s why thousands of houses in this city are sitting vacant and abandoned, and are on their way to the landfill.
32) The median sales price of our housing needs to increase. I’m not talking about it going into the stratosphere. I’m talking about it going from $64,000 to, like, $90,000 - still extremely affordable, even for a working-class household with a modest (but reliable) income.
33) The first step to revitalizing a city like Akron is to understand supply and demand, and how it drives the real estate market. Without that understanding, the decline will continue.

Fortunately for Akron, we have a Mayor who understands that.

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