Is the price you paid for a house irrelevant to its resale price?

15 North Crossway

15 North Crossway

Back in the good old days, when real estate prices were zooming skyward with seemingly no ceiling, I’d have argued that it was not. Excepting those buyers who tried to flip their purchases for a hefty profit within months, who cared what someone paid for his house four years before?

And that’s still true today, sort of, only in reverse. Market value is what a ready, willing and able buyer will pay you today, not what you paid for it in 2005 (I’ll post later today Alan Greenspan’s observation that anyone who bought a house after 2005 [corrected] is probably underwater, but that’s another story). But I still like to know what a buyer paid for his house, if only to gauge what they think their rate of appreciation should be. This new listing, for instance, was bought new in 2002 for $3.925 million and is listed today for $7.195. That really is irrelevant because it’s price depends on what other homes in Lucas Point are selling for these days, not what they sold for in 2002. But it’s interesting, all the same.

One observation about this listing: it shows the roof insulation as “R-10” and wall insulation as “R-30”. That’s probably a typo, as an R-10 rating can be achieved by laying out a thin blanket of mouse hair and newspaper, but even if it’s the walls that sport the R-10, that’s not much for a house near the water. By contracts, the new house at 38 French Road has R-59 in its attic and R-27 in the walls. That’s exceptional, like the rest of the house, but the new construction on Shore Road asking about this one’s price has R-38 attic, R19 in the walls. Just saying.


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10 responses to “Is the price you paid for a house irrelevant to its resale price?

  1. Cos Cobber

    Gideon hinted that there has been a flurry of activity of late. Maybe Gideon would be a sport today and tell us about all the houses that have recently gone to contract.

    • christopherfountain

      There has been a flurry of contract activity, Cos Cob, and I’ve noted them here – I’ll compile another summary later today. But what I find significant is that almost without exception, those contracts reflect a loss on the part of the seller or builder. No one is getting rich on residential real estate these days but as a few sellers realize that and drop their prices, they can move their property. Most sellers refuse to do that so we have a huge inventory and a tepid, albeit slightly stirring, pool of sales.

  2. xyzzy

    I’m glad I wasn’t drinking any coffee when I read that listing price.

    Good luck!

  3. Peg

    When people say to me, “but we paid $xxx for our house 4 years ago” – I respond, “if you had paid $xxx plus $yyy, should the buyer pay that much more for your home?”

    All that matters is how buyers perceive your home today, relative to what else is on the market and what has been selling RECENTLY. Whether you paid $2 million or $5 million – irrelevant to them. (Just plug in $350K or $430K for our market, Chris :))

    Some “get it” – some do not.

  4. maxxman

    “Alan Greenspan’s observation that anyone who bought a house before 2002”

    Before 2002? or after?

    • christopherfountain

      The actual quote was “after 2005” so I not only typoed an error, I misquoted him. I’ll go fix it – thanks.

  5. Roger

    i’m looking at 2 recent sales in Riverside(actually contracts) – 284 R’side Ave and 72 Summit…
    R’side Ave was asking 999K for fixer-upper on .38 acres – several bidders but did NOT get asking (OMG!) and 72 Summit was asking 795K for fixer-upper on .26 acres – George Cross probably it himself – he has a rental across the street.

    Those deals put everyone (including myself) underwater (glug, glug). Any new appraisals in this area is going to use them for comps., despite the fact that they both were estate sales (probably with motivated trustees/heirs).

    Interesting times…looks like I’ll be moving around the corner and in with you Chris, get the spare bedroom ready…:))))

  6. Anon E. Moose

    R-10, R-30, R-300… whatever the buyer wants to hear to make them swoon with open wallet.

    Yet another stellar example of the fine professionalism and attention to detail found throughout the Greenwich realty guild, the presumptive upper echelon of the used house sales profession. Should a buyer presume that the seller paid as much attention supervising the builder as they did in selecting their agent?

  7. W.

    I think what someone paid in early 2001 (or earlier) is relevant. Back then, people for the most part bought houses based on real income/wealth, not phony leverage. Any price during the bubble years (2002 through 2007) is totally irrelevant, except insofar at it indicates an underwater seller who is going to be unrealistic to deal with.

  8. Anonymous

    Did not get a chance to see this at open house today- what is with the price? they bought it in May of 02 and paid 3,925,000. Does not look like it has been renovated according to the listing.