Ask Adam: Size or Location?

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This regularly-scheduled sponsored Q&A column is written by Adam Gallegos of Arlington-based real estate firm Arbour Realty, voted one of Arlington Magazine’s Best Realtors of 2013. Please submit follow-up questions in the comments section or via email.

Question: Though the lots in Arlington are relatively modest, it seems that the size of new houses continue to grow. Has size now trumped the importance of location when it comes to real estate?

I remember when it seemed absurd to think that someone would try to sell a house with virtually no yard. Now it is becoming the standard rather than the exception with new homes.

Appraisers, Realtors and homebuyers have adopted cost-per-square-foot as a method of determining value. This trend is forcing builders to maximize the square footage of the homes they build in order to increase value and make a profit. Evidence of this trend is the proliferation of homes that are outgrowing their yards and the addition of a fourth level. My point is that size definitely plays an important role in determining market value.

The *cost* in the cost-per-square-foot equation is highly affected by location. Quite simply, the more desirable the location, the greater the demand and the higher the cost-per-square-foot. It is the reason why appraisers and Realtors like to use comparable sales from the same neighborhood or a very close proximity to determine a home’s value.

Location also plays a major role in determining the investment potential. My friends in Ashburn like to point out how they can buy a brand new house for what people pay for a 2-bedroom condo in Arlington. This may be true, but how did those homes’ values hold up just a few years ago when the real estate market softened? From what I recall, the 2-bedroom condos in Arlington held their values quite well, while the houses they build in droves out in Ashburn were decreasing in value by double-digit percentages.

In the current market, almost everything looks like a decent investment, but I expect location to play the key role in how much you will profit when it is time to sell. Here are just a few of the indicators to keep an eye out for:

  • How has the micro-market you are considering performed during “cold” and “hot” markets?
  • Are there any major improvements being made to the area? The Merrifield area surrounding Mosaic District is a good example of an area that is becoming exponentially more appealing.
  • Are convenient commuting options available?
  • Does the area have a favorable WalkScore?
  • How much housing supply is on the horizon? Areas with a seemingly unlimited supply of new homes always worry me from an investment perspective.

When it comes to real estate… size matters, but location is still king.

The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of ARLnow.com.


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