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Build a Backyard Cash Cow with an ADU

March 13, 2023

Rise and shine! It's a new day and The Shaker is here to serve you the best mix of residential real estate news. Yummy yummy.

THE BIG SPLASH

Build a Backyard Cash Cow with an ADU

What's important to know:

Joyce Higashi, a San Jose native, built an Accessory Dwelling Unit (ADU) in her backyard in 2020 and urges other California homeowners to do the same. Higashi rents out the 500-square foot, one-bedroom ADU for $3,000 a month to traveling nurses for three months at a time.

  • Higashi built an ADU in her backyard to have passive income while semi-retired

  • At first, she explored doing a custom build but found it confusing and expensive

  • She eventually discovered prefab ADUs and decided to have one built by Abodu

  • The COVID-19 pandemic caused some delays, but the ADU was completed in May 2020 and has been rented out ever since

  • Higashi now advocates for ADUs and has given presentations about them at networking events in the Bay Area.

A SCOOP OF LUXURY MARKET

Luxury Home Sales Take a Dive

  • Sales of luxury homes have decreased by 45% compared to the same period last year, with Miami and the Hamptons seeing the largest drops.

  • Volatility in financial markets is having an outsized effect on the luxury real estate market.

  • While competition is easing due to falling demand, supply is still historically tight, and new listings are down 22%.

  • Luxury home prices have risen, with the median price up 9% compared to the same period the year before to $1.09 million.

  • The lack of supply has pushed luxury home prices higher, with prices hitting an all-time high of $1.1 million in the spring of last year.

A SCOOP OF INSIGHTS

Building Your Own Home in Utah is Cheaper Than Buying One

  • Utah is one of only 18 U.S. states where it is cheaper to build a house than buy one, with an average total building cost of $538,000, $97,000 less than the average single-family home listing price of $635,000.

  • Realtors in Utah are seeing an influx of buyers from California and other coastal states, who are drawn to Utah's lower home prices and need for more space.

  • Incentives like seller concessions, loans, and discounts are becoming more prevalent, making new builds priced competitively with older homes.

  • Utah's real estate market still has a supply issue, leading to rent prices continuing to rise even as home prices have gone down further.

  • Agents who can adapt and provide great service in any kind of market will do well, while those who struggle with change may fall behind.

A SCOOP OF MARKET DATA

Federal Reserve Data Shows How Hard It Is to Buy a Home

  • According to the Federal Reserve Bank of Atlanta, U.S. housing affordability is at its lowest level in a decade. As of December, the median American household would have to spend about 42.9% of their income to afford the median-priced house.

  • The rapid decline in affordability stems from the highest mortgage rates in years and steep home prices. During the COVID-19 pandemic, home prices soared at a pace not seen since the 1970s, and buyers flocked to the suburbs, leading to inventory shortages.

  • Higher interest rates have put homeownership out of reach for millions of Americans, especially first-time homebuyers who are most sensitive to affordability challenges.

  • Even with higher interest rates, the median price of an existing home sold in January was $359,000, an increase of 1.3% from the same time a year ago, marking 131 consecutive months of year-over-year home price increases, the longest-running streak on record.

  • The decline in affordability has led to delays in homeownership for many Americans, even those who have followed all the correct steps to a successful financial future. The current housing market presents a significant challenge for prospective buyers, especially those seeking their first home.

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