Buy land, they ain’t making any more of it.

Available: Cheap Land on Mars -- Panoramic Views

Ever wonder how much that would cost you in San Francisco? Ever think it might make sense to buy your own little piece of heaven and build the house of your dreams on it rather than pay through the nose for an old Victorian lady wearing a lot of make-up and suffering from 100 year-old plumbing?

First off, you may spend a lot of time looking. Since 2005, there have only been 216 undeveloped land sales in San Francisco. I’ve tabulated the results by ZIP code for the 208 for which there was sufficient information to calculate the price per square foot.

With so few data points available, one should be careful drawing conclusions. For example, $673 per square foot for land in Hayes Valley and/or the tenderloin? I don’t think so. With only two data points for that zip, who knows why?

Still, the numbers make an overall kind of sense. Zip 94109 (Nob Hill, Russian Hill) is at the top end at $495 per foot; zip 94124 (Bayview) is at the bottom. Most of the zips line up more or less where you’d expect them to.

A quick recent case study: a 1900 foot “view lot” on Diamond St in Noe Valley, heading up towards Diamond Heights sold in June 08 for $1,052,000  — a cool $100,000 over the asking price.  That’s $550 bucks a foot.  That price included approved construction plans and permits for a 3100 square foot 4BR/4BA home, complete with elevator.  Construction costs can obviously vary widely, but my insurance broker quotes an insurance industry “replacement cost” range of $300 to $500 per square foot for San Francisco/Marin.  That includes architectural fees, etc.

Take the low end of that range and you get a construction cost on that house of $930,000.  So you’re in for $2 million before you spend a dime for financing charges, delays, cost over-runs, law-suits from disgruntled neighbors, seeing your shrink, costs of divorce, etc.

This confirms my view that the only people who can really make money developing residential property in San Francisco are the ones who can do big multi-unit projects and contractors who don’t have to pay retail to build or fix something.  The market’s too efficient to leave any fat for people just looking to build and spin.  Same thing’s true for the mythical “fixer-upper.”

On the other hand, if you’re still one of the happy few who don’t feel beaten down by the daily economic news, perhaps you should go ahead and build that dream-house.  There’s always slim pickings for 3,000 square foot homes in San Francisco, let alone ones equipped with an elevator.  And if you do find one, you’ll be paying north of $2 million anyway.

Just be sure to budget extra for the shrink and the divorce attorney.

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