Which Type of Neighborhoods Hold Their Value?

By: Jerry

So…you’re thinking about buying a house for the first time.  Or maybe you’re a homeowner who’s thinking it’s time to sell out and make a move.  But you’re having a hard time figuring out neighborhood home value estimates.

There are a lot of factors to figure into the buying or selling price of a home in a given neighborhood, so let’s talk about them.

• Location, location, location.  It’s such a tired cliché, but it’s true.  A farther-out neighborhood that isn’t convenient to shopping, businesses, highways, schools, transit lines and entertainment just simply isn’t going to command top prices.  With gas prices as unstable as they have been, even the new neighborhoods of McMansions may become a lot less desirable due to location.   In many areas, neighborhoods laid out in the Seventies and Eighties were done in cookie-cutter fashion, with little planning in regards to parks, libraries, schools, shopping and other amenities.  Houses were built cheaply, sometimes with duplexes, four-plexes or apartment buildings scattered among them.  Many of these neighborhoods are well on their way to slum status already, with neighborhood sale prices in the basement (a good thing for an investment/rental-minded buyer, though)
• Neighborhood crime.  Real estate agents key home values and marketing against the neighborhood crime stats for a given area.  Property crimes like breaking-and-entering, car burglaries, even graffiti can skew neighborhood crime figures and drop home prices for the whole area.  
• Prevailing home prices.   Although that’s a variable that depends on a lot of other factors like condition, size, lot size, street location and numerous other things, a house that sells high or low can skew neighborhood sale prices for the whole street.
• Renters vs. homeowners.  Rental properties, even if well-kept, can drag down neighborhood home value estimates for the homeowners in the area.

These are just some of the tools that real estate agents might use in calculating a set of neighborhood home value estimates.  If you’re a seller who’s testing the waters, you might want to consider some of these factors before spending the money on an appraiser.  Remember, if you set your price too high and the home stays on the market for a long time, you might settle for less money than you ever wanted to.  Check into prevailing neighborhood sale prices before going too much further.  

If you’re a buyer, neighborhood home value estimates are a good starting point for your search, as you think about your specific needs and what your budget will allow.