Tuesday, October 26, 2010

How can you tell if a neighborhood is in decline?

How can you tell if a neighborhood is in decline?

Neighborhoods, like everything else, go through a life cycle. Appraisal texts define the cycle as either growth, stable, decline or revitalization. Growth is easy to spot, as you can see new houses. And tear downs for rebuild and re-modelers trucks point toward revitalization of mature neighborhoods.

But how can you tell if a neighborhood is in decline?

Some things to look out for.

Are there a higher percentage of properties for sale than other neighborhoods? Just drive around and observe the “for sale” signs?

Talk to property managers. Are they having trouble finding renters that qualify for the same rents that worked fine a year ago?

While most neighborhoods are seeing price declines right now, are the price declines steeper than other areas?

Are the market times longer than other areas?

Are people taking care of their homes?

What do the cars in the neighborhood look like?

Does the neighborhood seem clean or is their trash around because people have stopped caring?

Look at the neighborhood retail. Are their high vacancies? Is the tenant mix changing to accommodate a less affluent neighborhood?

Are young families moving IN or OUT? My parents live in a declining neighborhood just outside Detroit. Mom stopped buying candy for Halloween because there are so few kids. My sister lives a mile away where homes are bought as tear downs and there is home remodeling. There are so many children trick or treating my sister runs out of candy. Which neighborhood would you rather buy in?

What may appear to be a really good bargain on a property may not be such a good deal if the neighborhood is in decline. You may be better off spending more on a property that is likely to appreciate when the market recovers.

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