According to a report from Ellie Mae… millennials represent 45% of all purchase loans, making them the largest age group in home purchasing for the first time. This is a notice- – able shift for a generation previously known to prefer renting to homeowhership. – US News & World Report
Homes for Living, Working and Horseback Riding
Most Americans live in homes designed and built for one purpose: daily life apart from work. Yet for many people, the ideal home would be a place for many activities, including work. And in fact many Americans live in specialized homes outfitted for business activities like recording studios, animation studios, martial art dojos, commercial bee keeping and horse breeding.
The specialized home seems to be growing in popularity at a rapid rate. Of course, part of the shift to specialized homes reflects the national enthusiasm for hobbies and leisure-time activities: For many other American homes, however, the changing nature of home is about something more fundamental: work.
Home Becomes Office
In today’s world, home and workplace are converging. According to census figures, more than a third of Americans (34%) already work out of their homes. These people are part of the so-called “gig economy,” which gets its name from the idea that people are working many individual jobs, or “gigs,” as opposed to working a single full-time job.
“Employment in the gig economy is growing far faster than traditional payroll employment,” according to a study published last October by the Metropolitan Policy Program at the Brookings Institution.
“Over the past 20 years, the number of gig economy workers-those who operate as independent contractors…has increased by about 27% more than payroll employees,” writes Nick Wells of CNBC.
This is a big change in American life. Traditionally, many Americans have preferred to keep life and work separate. During the height of the industrial age, breadwinners would commute long distances to office buildings and factories in urban areas, and then return home to suburban greenery and tranquility.
Due to the growth of communications technology, notably the Internet and the Cloud, people are increasingly able to work at home at least part of the time. As a result, home looks increasingly like the office, with at least one room set aside for laptop, a Wi-Fi router, a smart phone and the like.
“With portable electronic devices allowing people to work from anywhere and at any time, the lines dividing office, hospitality and home design are blurring,” writes Ron Nyren in Urban Land Magazine.
Even before the Internet, the idea of combined homes and workplaces— so-called “live-work housing”—had gained popularity among city planners. In Los Angeles, San Francisco and other cities, officials have been experimenting since the 1980s with housing that included workplaces for artists and craftsmen.
Officials saw the live-work housing as a way to revitalize declining neighborhoods, especially industrial areas that could attract developers to convert old buildings to stylish housing. “Thanks to popular culture, most people’s idea of a live/work space (is) a loft-like former industrial space,” writes Adel Zakout in the Huffington Post.
In Los Angeles, live-work units were usually townhomes, with a storefront at street level and a residential loft above it. In Minneapolis, the city formed a venture with a private home builder to create small homes with large rooms serving as art studios. As in LA, those units were sold or rented to artists at a subsidized rate.
The live/work concept of housing became a widely spread idea, with projects built in Belgium, Chile, Germany and Switzerland.
Despite the popularity of the idea among individuals across the world, live-work housing has not become a widespread type of housing in America. One possible reason for the limited appeal is that such housing tends to be small and does not lend itself to raising families as well, or as comfortably, as the traditional American suburban home.
Careers That Need Special Spaces
Most people don’t need anything as elaborate as live-work housing to work at home. For most, a spare bedroom suffices as a home office, especially when work doesn’t require special equipment beyond basic home electronics. This setup works well for professions like bookkeeping and accounting, financial consulting, freelance writing and other jobs.
Present-day musicians, recording engineers and even amateur music buffs, however, prefer a large room for recording gear. These recording studios may include special acoustic paneling to dampen sound, plus large-scale equipment such as mixing boards, synthesizers, microphones and the like.
The cost of creating a good home recording studio, in some cases, is comparable to that of an ambitious kitchen make-over. Home studios run “from a few hundred bucks to $50,000,” according to a Las Vegas-based sound engineer. A professional studio, with better equipment, can cost from $150,000 up to $1 million or more.
Not All Improvements Boost Value
True, homes with an up-to-date recording set-up can be catnip to musicians (and people who fantasize about rock stardom.) And conceivably, a recording studio can be a “point of sale” for buyers who are also music professionals.
In music-rich Los Angeles, for example, at least three different brokerages advertise listings with built-in recording studios; one LA brokerage claims it has 161 listings for homes outfitted to immortalize one’s musical thoughts.
A variant on the recording studio is a home containing a professional photography studio. Photo studios, which have high ceilings and plenty of electrical outlets for multiple lights, are far less common than recording studios. (Many photographers build small studios in their home for portraits and other small-scale projects, however.)
A noteworthy example of a combined photo studio and house is an award winning design by Hermosa, CA-based architect Dean Nota. Leaving a 2,000- square-foot building on the site, the architect added a graceful modern addition that partially wraps around the existing building.
AVOID OVERPRICING IN GOOD SCHOOL DISTRICTS
“If your home is located in a highly sought-after school district, you can likely set the price a bit higher than if it were in a district that is less desirable. However, be cautious not to price yourself out of the market-there will be other people out there also selling their homes, and your school district isn’t the only option in the world to parents. A nice balance between getting a high asking price and not being so greedy that you price yourself out of showings is something a savvy real estate agent can help with.”-Megan Wild, US. News & World Report.
A Comparison with Swimming Pools
The tough question, with a possibly sobering answer, is whether these expensive improvements add value to your home when it comes time to sell.
Data is hard to find on the value recording studios or other industrialized spaces may add to homes, above that of “comps” or comparable sales of neighboring properties. Until contrary data appears, it seems that a recording studio, while attractive, may not add that much dollar value to a home. That means, among other things, that the owner may have a hard time recouping the costs of building and outfitting the studio.
If you are looking both to add value and recoup your investment, stick to basics, according to Remodeling.com, a home- improvement website. A modest kitchen upgrade of about $15,000 tends to return 92.9% of the money spent, while upgrading such basic items as roofs and windows has an 80% return. The website recommends homeowners not waste their money by over-improving homes, in the hope of getting a better sales price.
Artist’s Studio or Spare Room?
A separate artist’s studio is a definite plus for many buyers. Often, marketing descriptions of homes claim that the homes have artist studios, or spaces suitable for painting and sculpting. And many properties do in fact have a separate building in the back yard, or occasionally a converted garage, that deserves the name of artist’s studio. This feature may turn the head of a prospective buyer who is also a professional artist.
On the other hand, one Los Angeles Realtor recently listed 53 homes in the local market as having artist’s studios. These descriptions may seem misleading, at least to people who read ads too quickly. A closer look at individual properties, however, reveals that most of the homes thus listed have multiple bedrooms, any of which could be set aside for art activities.
There’s nothing wrong about saying a bedroom is suitable to be an art studio. By the same token, one could just as easily advertise that a given home had room suitable for a theoretical physicist or, perhaps, a travel agent.
NEARLY HALF OF TOP MARKETS OVER-VALUED
“Prices just keep soaring while incomes fail to keep pace…At the end of July, of the top 50 markets, based on housing stock, 46% were overvalued, according to CoreLogic. A market is considered over valued when home prices are at least 10% higher than the long-term, sustainable level. On the flip side, 16% of markets in the report were listed as undervalued and 38% came in (correctly) valued.” – Diana Olick, CNBC
To the Great Outdoors!
So far, the specialized homes under discussion have dealt with urban and suburban housing. Yet specialized homes can be found in rural areas, too.
Perhaps the most popular form of specialized quasi-rural home is the equestrian estate or horse ranch. Even people in suburbia can enjoy the feeling of country life by keeping horses.
Equestrian properties range in size from typical suburban lots, with stables for one or two horses, to enormous rural sites covering hundreds of acres, with large-scale performance areas.
Horse Ranches with Texas-Sized Prices
Horse ranches are popular enough for some Realtors to make a specialty of them.
Not surprisingly, given the prestige of horsemanship in upper-crust circles, many of those equestrian properties are located in high-end suburbs, with prices to match. A large equestrian estate in Parker County, Texas, was recently listed for $5.95 million. The property includes a 4-bedroom, 4.5-bath home, plus an eight- stall horse barn, with a professional indoor arena that is air conditioned, and two larger working areas for training.
Horse ranches can also serve as the base for businesses like horse breeding or riding lessons. And small ranches often have a business basis to help support them. Obviously, large ranches can accommodate a number of different “ag” activities, including farming, cattle ranching, bee keeping and maintaining a “dude ranch” resort. The close proximity of home and work in ranch life is too obvious to point out.
The combination of farming and cattle ranching has a romantic tug, especially for hard-working city people who long for big skies and quiet surroundings. “Among the fantasies that keep many of us going on dreary days, owning a vast ranch out west would rank up there, along with living on a beach or gazing out over your vineyard at night,” writes Paul Sullivan in the New York Times.
LOW INVENTORY AFFECTS SALES PACE
“Buyer interest in most of the country has held up strongly this summer and homes are selling fast, but the negative effect of not enough inventory to choose from and its pressure on overall affordability put the brakes on what should’ve been a higher sales pace. Contract activity has mostly trended downward since February and ultimately put a large dent on (summer home sales) closings.” – Lawrence Yun, chief economist, National Association of Realtors
Big Tax Breaks for Farms and Ranches
Farms and ranches have other features that may attract investors and buyers: Owners of qualifying properties can get tax breaks in all 50 states. These tax advantages have helped popularize farm- and ranch-ownership among the very wealthy. In California, for instance, farmers and ranch owners can qualify for property tax breaks of 20%-75%.”
According to Forbes magazine, “all 50 states give preferential property tax rates to agricultural land to help farmers and/ or fight urban sprawl.”
“But how easy it is to claim this break varies greatly, and some states recoup back taxes if the land is taken out of farm use,” says Forbes. “Rules to qualify for tax property tax breaks vary widely; in California, owners must own at least 100 acres and must agree not to develop their land for at least 10 years….”
In comparatively lenient New Jersey, farmers qualify for tax breaks if they devote only five acres of land to farming and report at least $500 in annual farm sales.
Tax advantages for farms and rural housing vary from state to state, so it’s important to consult with a knowledgeable accountant or lawyer when considering an investment in this type of property.
Listening to the Crickets
A quiet night on the ranch, with crickets chirping in the background, seems a long way from industrial areas and live- work housing. Ranch life reminds us that life and work traditionally belong together; for city dwellers, the re-emergence of the specialized house is a sign that at least some people would like to recreate that way of life, while avoiding long commutes and other workday stresses.
Are you interested in finding a home that can accommodate your career? Call us. It’s one of our favorite subjects.