How come big homes don’t appreciate as quickly as small homes?

Over the past 10 years, the market has found it’s way back from the lows of 2008/2009. Housing prices in our area (St. George, UT) have climbed to highs and the region has essentially run out of entry level housing and is short on all housing (12/2017). Builders are working as fast as they can, but demand is high, so prices are rising.

So why don’t big custom homes appreciate in value as quickly as smaller homes?

In our opinion some of it comes down to supply and demand. The demand of entry level homes outpaces the demand for high level homes several times. But there is demand for big homes too. Retirees from California and other places are coming in waves to St. George where they can get a large home for half the price of California. So why haven’t we seen a bigger price jump?

Our answer might be this: Big homes are typically custom built. Anyone willing to spend half a million dollars for a home, generally want “a dream home”. So they’ll build it brand new, with all the rooms, extras and features they’ve always wanted.

Because of this when it comes time to sell the house, it’s generally worth equal or less to the amount it cost them to build it. Few people are willing to pay a million dollars for a large, older home they’ll have to work on, when they could build a new one that meets all their own needs, for the same price. Homes with beautiful views, animal rights, or other unique factors help to keep some properties highly valued but more often than not the first buyer of a custom home pays a premium, while the second buyer gets it for a discounted price.