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.
I disagree with you. When I was looking at houses, the houses were referred to by their combined value (e.g. home and lot). And when we were talking about rebuilding we didn't say "the $80,000 house on the $600,000 lot", we said the $680,000 house. It might be considered misleading, but it's certainly how realtors and other building professionals, as well as buyers, refer to home values here in CA.
#1 Posted by Thalia, CJR on Thu 12 Jan 2012 at 03:55 PM
Thalia, but you didn't say "we're tearing down a $680,000 house" did you?
#2 Posted by Ryan Chittum, CJR on Thu 12 Jan 2012 at 05:00 PM
Most of the real estate value in a house is ALWAYS in the land price. If Romney built the same "$750,000 house" in the worst neighborhood of Detroit, it wouldn't even be worth that much. Houses are worth what they can bring on the market. Period.
#3 Posted by Remington Steele, CJR on Fri 13 Jan 2012 at 06:23 PM
The house is already built to the lot setbacks so it can only go up, much to the dismay of his neighbors. They can protest this, in a place where the view counts. History shows that these types of suits can win.
#4 Posted by fmbjo, CJR on Mon 16 Jan 2012 at 02:24 PM
What? The house he's throwing away is only worth $750k? Well, OK then. We've all bulldozed a $750K house once or twice, right?
#5 Posted by Edward Ericson Jr., CJR on Mon 16 Jan 2012 at 03:37 PM
Everyone is unsympathetic to @Ryan's lonely cry for more accuracy and precision in reporting. He's right; most of the value is in the land at Romney's digs in, eh, La Jolla-adjacent. He has a good point, but it's not as flashy and click-producing, is it?
Not always is most of the value in the land, though. Here's a 10 million dollar place where the land is dirt cheap.(Scroll down past the map.) Even though it's on a golf course. Save your pennies!
#6 Posted by James, CJR on Mon 16 Jan 2012 at 04:00 PM
There is no such place as "Country Club" CA. It is in La Jolla, an area of town known as Marine Street beach, just north of Windansea, home of the Tom Wolfe's "Pumphouse Gang."
There is an area known as Country Club, but it is up the hill near the country club. Duh.
If you bulldozed the empty lot next door would you say they "tore up 12 million dollars worth of grass? (It doesn't seem attached to Mitten's property though.)
#7 Posted by Paul, CJR on Wed 18 Apr 2012 at 04:25 PM
La Jolla is part of the city of city of San Diego. It is not a separate city. For years a group of La Jollans have been talking about seceding from the city.
#8 Posted by Richard, CJR on Tue 12 Jun 2012 at 11:32 PM