Wondering what the ideal surroundings are for a home? Well, look no further than these 5 places that are proven to boost property values. The National Realtors Association and the Appraisal Institute, have identified five ideal neighbors for the prospective homebuyer. Obvious choices include schools and parks, but less likely candidates – like cemeteries – also made the list. For more on this continue reading the following article from The Street.
Homeowners ask only two things of a good neighbor in today’s real estate market: Shut up and raise my home value.
Homeowners don’t need much help spotting a bad neighbor — derelict properties, landfills and power plants don’t often sneak up on a neighborhood — but lately they’re happy to have just about any neighbor they can get. Existing home sales were down for the second straight month, according to the National Association of Realtors, with April sales off 0.8% from March. That’s despite housing prices that are roughly $9,000 less than they were last year when the government was doling out its first-time homebuyer credit, mortgage rates that Fannie Mae says are down from 5.1% last April to 4.84% last month and a 9.2-month supply of homes still on the market.
"Given the great affordability conditions, job creation and pent-up demand, home sales should be stronger," says Lawrence Yun, the association’s chief economist. "Although existing-home sales are expected to trend up unevenly through next year, unnecessarily tight credit is continuing to restrain the market, along with a steady level of low appraisals that result in contract cancellations."
The only idiotproof way to avoid low appraisals down the road is to find neighbors that appraisers, real estate agents and homebuyers love. With help from the National Association of Realtors, National Association of Home Builders and the Appraisal Institute, TheStreet came up with the five best neighbors a new homeowner could home for:
A good school system
We know, this answer is like saying a blue sky makes a good neighbor, but the National Association of Realtors’ Profile of Home Buyers and Sellers notes that the percentage of buyers seeking quality schools (25%) ranks behind only those seeking a shorter commute (49%), nearby family (39%) and affordable homes (44%).
When even one child enters the equation, however, price (43%) and local relatives (34%) take a back seat to quality of schools (48%) and proximity to said schools (43%). Both real estate agents and homebuyers are well aware of this, and that’s where the premiums come in. A joint study by UCLA and Dartmouth College in 2004 found a 10% swing in home values between houses in school districts where mean test scores are within the lowest quarter of the country’s average test scores and a home where students average scores are among the top 25%.
It’s more expensive, but no one says you have to stay there forever. In fact, in many towns across the country with great school districts, high school graduation day and moving day tend to coincide.
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Creepy? Yes. Disconcerting, especially if it’s still active? Potentially. Quiet? Absolutely.
The Appraisal Institute’s Journal is conflicted about the effects of someone else’s final resting place on property values. Last year’s study Cemetery Proximity and Single-Family House Price surveyed properties near four cemeteries in Ohio and found that while two had no effect on housing prices, an ill-maintained cemetery near a tract housing development with no buffer between the two actually dropped the price of homes with a view of the cemetery by an average 10.1%.
It’s understandable. As the study acknowledges, cemetery workers, visitors, or trespassers can create noise or allow the cemetery to deteriorate; old embalming agents can sometimes contaminate groundwater; mosquitoes tend to run rampant on the grounds; and some people are just freaked out by tombstones and the sight of graves being dug.
That said, the study found that the view of a fourth cemetery actually raised home values by an average of 8.8%. In this case, the cemetery was well-maintained, offered a parklike view and had neighbors who saw it as place to walk, jog, exercise or otherwise enjoy the outdoors away from traffic. There’s also the issue of open space, as a cemetery almost guarantees that neighbors will never have to settle for a view of the back of someone else’s house or worry about someone else building up to the property line.
It’s a coin toss, but for those who love big open spaces and don’t mind the tombstones, a cemetery neighbor can be worth the cost.
In appraisers’ eyes, green attracts green. The Appraisal Institute generally looks at parks and other green spaces as "positive externalities" for surrounding properties, but doesn’t put a general premium on proximity to park space.
That’s likely because demand for nearby parks tends to fluctuate between homebuying demographics. Overall, 17% of homebuyers say they’re choosing a home because of its proximity to parks. That number dips slightly for single women (14%) and unmarried couples (15%), but jumps up to nearly 20% for married couples and homes with children. Those kids have to burn energy somehow, and the Wii and 23 readings of Good Night Moon are no match for actual activity. A good nearby park can be a parent’s best friend, the laundry room’s worst enemy and a home seller’s dream once it’s time to go.
The mowers and carts are noisy, fairway banter can get loud and lousy players are always one slice away from putting a Titleist through your television, but the pros (and even amateurs) outweigh the cons when a home has a view of the 12th hole.
Back in 1996, The Appraisal Institute found that houses with frontage on a golf course fetched an average premium of 8% compared with other homes in the area. In fact, some homes a 10th of a mile from the golf course gate saw their value drop 3.7% from the average price of neighbors closer to the action.
That’s all well and good when there aren’t a mess of baby boomers retiring and getting ready to grip it and rip it. Fourteen years later, the institute found golf course views were commanding a 42% to 85% premium at a Jack Nicklaus-designed course in South Carolina.
It’s a premium only select demographics are willing to pay, however. According to the National Association of Real Estate, only 13% of homebuyers with kids care about being near leisure activities, never mind on a golf course. That number jumps to 22% when either the kids haven’t arrived or have moved out completely, which makes an empty nest a very playable lie from just off the fairway.
A pond, lake or other body of water
So you settled for the golf course? Quitter.
Waterfront property doesn’t make the National Association of Realtors list, but the Appraisal Journal sees it as one of the easiest calls to make if you’re looking for home value. The same study that gave houses on golf courses a 42% to 85% premium over other houses in the area gave houses with views of a lake a 94% to 133% price bump over their neighbors. Even that’s conservative, as houses directly on the lake had markups of 124% to 287% just for their spot on the water.
Housing starts were terrible last month, down 11% from April, but anyone with a chance to build on waterfront property should have taken it. Back in 2006, the National Association of Home Builders noted that waterfront property in Midwest suburbs fetches a cool $92,000 (43%) more than the $217,000 price of an average home. That premium’s just slightly less than the 44% bump waterfront homes get in the South and the average 41% boost they get in the rest of the country.
The majority of Americans still want to be close to their job, but the value and view from a waterfront home might just make it worth adding a few minutes to the commute.
This article was republished with permission from The Street.