Homebuyers: How to Evaluate a Neighborhood

Aerial view of housing development

You are ready to purchase a home. You have done your homework and mapped out your affordable price range, saved sufficient down payment money, found a suitable lender, and have looked at some of the available homes. You’ve checked out the neighborhood (as well as a few neighbors) and found homes in areas that you find appealing. Have you given thought to how your choice of neighborhood can affect the lasting value of your home?

Assuming that you have evaluated the aesthetics of the neighborhood and found a home that appeals to you, here are a few tips to see if the value of that home is likely to hold.

Historical Values – As the old saying goes, past results are often the best indicator of future performance. Check websites such as Trulia or Zillow, or ask your realtor for the general history of home prices in the area. Have prices generally risen over time? How did the neighborhood hold up during the Great Recession?

As you check out the neighborhood, look for other trends that could either be good or bad signs. Are there many nearby homes for sale? Are there more foreclosures or rental houses than there used to be? Have sale prices gone up disproportionately to the rest of the surrounding area? If so, there must be a reason why.

Amenities – Consider areas with plenty of well-established amenities. Good schools usually top the list, along with parks, libraries, a well-funded police force, and a nearby fire station. Beautiful scenic views such as nearby mountains or lakes can add further value.

Neighborhood Jobs/Businesses – Check out the local businesses. Are there a number of them closing, or is there a lot of turnover? Are major employers that offer high-paying jobs nearby? Do those employers have a stable history? Are there colleges or universities nearby?Neighborhoods that hold their value well often have high paying jobs in close proximity or within a reasonable commute.

Check the nature of the surrounding retailers. Is there a preponderance of high-end retailers? Conversely, are there multiple businesses that suggest a downtrodden region, like payday lenders or pawnshops?

Appearance – Are the other houses in the neighborhood being well kept? Look for clean and well-manicured lawns, an absence of trash, and no obvious disrepair like peeling paint or broken gutters. There may be an occasional home that does not meet standards, but several unkempt homes are a bad sign. If there are any neighborhood covenants, check to see if the homeowners are keeping up with the covenant’s demands.

Transportation – The commute may be great during a weekend open house. Try driving the same route during rush hour.

Distractions – Are there nearby freeways, airports, manufacturing facilities, or other concerns that could cause problems with noise, smells, or other potential distractions? These may not be obvious unless you do a little reconnaissance with the neighbors or at a local coffee shop. Libraries (and librarians) are also good sources for local information.

Projects – Check with local planning and zoning authorities for any projects that could affect your property values such as new roads, subdivision changes, or zoning laws that could change the nature of the nearby area.

Your dream home may not necessarily be the one that holds its value the most, but lasting value should be one of your considerations as you review your choices for a new home. A new home is the largest purchase most people will ever make, and it is best to consider it an investment as well as a home.

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