Misleading Readers on Romney’s “$12 Million Teardown”

The value is almost all in the land

We’ve heard a lot about $12 million teardowns lately.

Tiger Woods’s ex-wife Elin Nordegren is tearing down her $12 million North Palm Beach house, we’re told, to build another house. More importantly, GOP’s presumptive nominee Mitt Romney is tearing down his $12 million California beach house and building a much bigger one, news that broke in August.

The San Diego Union-Tribune wrote back then that Romney was planning “to nearly quadruple the size of his $12 million oceanfront manse.” An MSNBC show said, “Romney is planning to bulldoze his $12 million, 3,000 square foot home near San Diego, California and replace it with an 11,000 square foot home instead,” a quote that made it into Newt Gingrich Super PAC’s mini-movie on Romney. Vanity Fair said he was looking “to bulldoze [his $12 million] 3,009-square-foot beachfront house” and The New York Times said he “plans to quadruple the size of his $12 million oceanfront mansion.” NPR called the house “Romney’s $12 Million Tear-Down” and Business Insider hollered, “Check Out The $12 Million Beach Mansion Mitt Romney Is Tearing Down.”

But these reports are all misleading. In super-desirable locales like San Diego beachfront, the land is usually worth more than the house. So while it’s perfectly fine shorthand to talk about someone’s $12 million house they bought, if they tear it down to build another one or simply expand it, you have to separate improvements from the value of the land.

According to Trulia and Redfin (I can’t find Romney’s property on the San Diego County Assessor’s site), the county assessed the value of Romney’s house at $8.7 million last year. Eight million bucks of that value was in the land and just $750,000 was in the 3,000 square-foot house and other improvements.

So in Romney’s case, he’s tearing down a $750,000 house to build one that’s much, much bigger. I haven’t seen any reports on how much he’ll spend on the new one.

Say what you will about tearing down a $750,000 house when the median U.S. home price including land is $164,000. It’s certainly a legitimate news story, if nothing else for the political tin ear it shows. But that’s different than tearing down a $12 million house, which pencils out to a replacement cost of $4,000 per square foot. That would imply the house is all but made out of gold. It’s nice, but it’s not that nice, as you can see from Zillow:

A somewhat amusing side note: Everyone reports Romney’s house is in La Jolla, but Google Maps says it’s in Country Club, California.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum. Tags: , , , ,