How can you tell if a neigborhood is appreciating?

18 Replies

Good evening everyone,

I just had a quick question.  I'm wondering how people usually tell if properties are appreciating in certain neighborhoods?

There's probably an easy way so excuse me if this is such an easy question to answer.

Thanks

Benjamin, 

One way is to take a look at the houses that have sold over the last three months or so--Redfin or another real estate site is good for that. Is it rising? Good indication of buyer demand.

Go to your local city or county building permit office, and ask for a copy of the last years permit applications/approvals numbers. Are they on the rise? Another good indicator. 

These are just a couple of ways. I would recommend learning more about emerging markets, this will help for the long run.

Best to you!

TM

You can always compare to what the price was back in 2006 before the crash. Knowing where it peaked at sometimes can help. Also zillow and neighborhoodscout.com provide predictions for specific areas. Although these may not be all that reliable it's still a piece of information to through in the puzzle.

Agreed with that others have said previously. 

Also, in most places the Starbucks rule applies, I.e. If there is a Starbucks within a mile or if they are planning to open one that is almost always an indication of a neighborhood on the rise...

@Benjamin Blackburn,

This is not an easy question, but it's a good one, and one I think about often.  I only really know Denver, so forgive my ignorance of other areas.

My opinion on the matter is a little tricky to discuss because it deals with primarily race and income.  Frankly, most people aren't comfortable discussing it as we have become very averse to talking about anything that may be offensive. I'm going to throw my opinion and real life observations out there, please consider it my view of the world as it is, not as I want it to be...

15-20 years ago the easiest way to get ahead of the gentrification curve was to follow the artists and homosexual couples into the less desirable neighborhoods.  In Denver, 20 years ago, this was 80211. At the time is was predominately Hispanic with lots of non-owner occupied homes.  The block I bought my house on had about 12 homes, at least 3 were gay couples.  They were the vanguard into the new neighborhood, pushed into areas where they could make their own space because they weren't accepted into traditional neighborhoods. Now, 80211 is still a very hot Denver zip code, but most of the gay couples have left (or nobody notices anymore really), and most of the Hispanics have been pushed out.  Now it's full of stroller-pushing white folks, and oh yes, @Flavio Zanetti is correct, the Starbucks began to show up in 2003-2004. 

Today, I think it's the hipster culture leading the charge into new neighborhoods.  They transformed RiNo (80205) in Denver.  Since 2010, land prices have increased 4-5X. This comes at the expense of displacing the existing Black population, a group that's occupied  the 5-points neighborhood since the 50's.  5-Points had a negative and scary connotation up until a few years ago.  Now white people are tripping over themselves to run into that neighborhood and property value is skyrocketing. Zillow Link Sort this chart to the bottom tier of home value...

Gentrification is an ugly process, generally displacing low income minority families. It's also not really possible to stop it (or start it for that matter).  It happens organically when there's an unsatisfied demand. When all the existing places are filled and expensive, economics push people to the next most desirable option.  Eventually, these neighborhoods hit a tipping point and the whole thing flips.  6-7 years ago, even at the height of the market, pre-crash, you could buy homes in Sunnyside for $200k, today the median home price is $344k.

So now I look at the map of Denver and try to evaluate where the rich white people will want to move next.  People will call me a cynic and a racist, but I feel like you have to consider race when evaluating a neighborhood.

I hope and expect that there will a date in the future when the race of a neighborhood will not correlate to it's value. In the mean time, if you ignore it, you will be missing an important piece of the puzzle.

In the burbs' I'd just pay attention to school districts. Parents lose their damn minds over school ratings.  Buy land in a neighborhood with a poorly rated school that was improving, when it was finally satisfactory, I think you'd make a killing. 

As always, I'm open to hearing other folks opinions, especially if they're contrary to mine, that's how we learn.

Good luck.

@Tyson Taylor   - Wow - SPOT ON!

I will add that it doesn't always have to be the next hip place to see decent appreciation. Looks the comps in an area over the last 3, 6, 9 months and see what the values are doing. It doesn't typically happen over night. If there is an area that you are particularly interested in just watch it closely. With all of the tools online today you have information equal to the MLS in most markets.

apparently I got lucky as I moved to Sunnyside 80211 fourteen years ago and bought a rental in Cole 80205 in 2012. Both areas have changed (and appreciated) a ton.

I think both areas still have a way to go with some of the big changes going on at 41st and Fox (new light rail), Globeville and National Western Complex.

Hopefully these links come across if you're interested in details:

http://www.denvergov.org/Portals/193/documents/38t... and Fox Station Area Plan_11_4_09.pdf 

http://www.denvergov.org/Portals/728/documents/NDC...

http://www.denvergov.org/Portals/646/documents/pla...

@Tyson Taylor

 I wholeheartedly agree with every word you wrote.  Even though it's ugly and the issue is definitely volatile with regard to race, it doesn't mean it's wrong.  I think you wrote a very thoughtful post about a very difficult topic and I applaud you for taking the step.

We can work to help make the change that's needed while still acknowledging the ugliness with open eyes, hearts and minds.  As real estate investors, we can make a big difference by making sure we are not discriminating based on gender, race, etc.  Just treating minorities fairly in the business we do every day can have a huge impact, one family at a time.
Being able to understand and be aware of our own privilege, whether it's gender, race, sexual identity, socio-economic status or whatever and make sure we're treating those who are not as privileged as equals can go a long way.

@Jim Tiernan , You were lucky, or smart.  I just picked up a small multi family in Cole that needs a ton of work, I think you're spot on about that neighborhood, I wish I'd had the resources to get in there when you did.  Globeville is also interesting, I like that little neighborhood too.

This has moved from the original basic question into an interesting and important  topic. I think most investors want to be part of the renaissance of a neighborhood and to bring positive change in terms of property values, levels of crime and quality of life. But sadly-- we're often just pushing issues that we think we are solving somewhere else. Here's an interesting article in The Atlantic about the rise of poverty in the suburbs. It's too easy to think that because we have "cleaned up the downtown" that all is well and everyone is thriving. I don't claim to have answers/solutions for any of this, of course, but I am glad to see it being acknowledged and discussed here.

As far as Denver- I was one of the artists moving into 80211 in the mid 90's. I bought a triplex in 80212 not long after. I sold up a few years ago and moved to N Aurora (80011), and some of my artist friends have as well. My motivation for moving was purely financial - and it has improved my financial picture dramatically. Would I have stayed, otherwise? Probably, although I will admit that the saturation of laptoppers and babystrollers was getting a little overwhelming, LOL. 

I see signs of both suburban (semi-suburban?) poverty and gentrification around me now (just north of Anschutz). After so many years of hearing the Highlands described gushily as "the new Washington Park" , my husband and I always joke that "the east side is the new west side!"

The light rail station development areas like @Jim Tiernan  is talking about are already having an effect out here.

Sorry that we've gone all Denver on your post, @Benjamin Blackburn! Not to mention getting sociological as opposed to a simple "keep track of the last few months of sales" answer. 

But I hope it gives you some food for thought that you can apply to the Houston market.

Follow the money! Here in SF, the (mostly) white tech workers (mostly Twitter) are displacing the (mostly) white heroin addicts in the lovely SRO hotels in the Tenderloin district. I predict a Starbucks in 18 months. Seriously.

I think it's possible to tell from local happenings long before the growth or gentrification shows up in the official tallies. Keep your ear to the ground locally - mostly online - and you can find out a lot. 

Lots of info in the local sheets (East Bay Express, SF Weekly here in the Bay Area). And in the local blogs, esp the contrarian, RE bubble and anti-growth ones.

Dr Housing Bubble is great for LA: (Real Homes of Genius: Compton Edition) - perhaps there is one of these for Houston?

Let us know what you find!

@Flavio Zanetti That makes a lot of sense about the #StarbucksRule... I will definitely keep that in mind.

@Travis Sperr I will go back 3 quarters and check out the comps.  I'm pretty sure I will find some good info.

@Jean Bolger No worries at all.  It was interesting seeing what you all were talking about. (thanks for the answer)

Originally posted by @Travis Sperr :

follow the skinny jeans, knit caps covering only part of the head in the dead of summer and cupcake shops. 

 haha! by the time there's a cupcake shop, it's probably way out of my budget...

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