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May 13, 2009


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I live in the smallest/cheapest unit in my condo building. And with regard to the neighborhood, I'm definitely in the lowest 10% with regard to price. My condo is about $160K, but right accross the street are townhomes that go for over $1 million! I love it. People assume I have such an expensive place because of the neighborhood (median price is well above what my place costs), but that's because my place is so much smaller than average (average is 2-3 bedrooms and mine is 1).

This is a crude rule of thumb. Now you wouldn't want to own a nice home next to a dump, but there probably isn't much benefit to owning a dump next to a nice home unless you are willing to make it nice, and if there is another dump down the street it makes little difference. It also isn't a good idea to overimprove for the neighborhood, but if someone has, that is a benefit to the purchaser.

Most modern tracts are developed with a fair degree of uniformity as this maximizes value so there is less room for this today. Too many people believe this old rule and their actions often result in making it untrue. Modest homes become overpriced and expensive ones underpriced. Now you will be in a better position recouping improvements in a modest home than an expensive home but you will obtain a better deal on an expensive home than on a modest one and will have the benefits of enjoying it. Modest homes are easier to flip, but expensive homes are easier to hold. Many seek homes based on school districts and will overpay for modest homes for better schools. That is fine if that is why you are choosing it, but it is generally a bad deal if that is not. Most want to live in the best neighborhood they can afford, but beware confusing modest with fixer. Fixers are rarely bargains.

My wife and I bought the proverbial "cheapest house in the most expensive neighborhood" mainly because the house fit our needs.

It was only earlier this year, when we went to refinance our mortgage and had the appraisal done, that we realized what a benefit we'd accidentally stumbled into. It'll be nice when it comes time to sell, but in the interim I sure wish I could get my property taxes to go down!

I don't understand peoples' fascinations with property value appreciation. Really, it only matters when you sell the house. Until then, all an increased value does is raise your property taxes.

I bought the worst house in an older neighborhood. It's not the best by any stretch of imagination, but it's a wonderful neighborhood for those of us who live in it. No house around it is worth $100K and I bought mine 2 years ago for $38K. I've put some sweat into it and a few thousand and it's now one of the nicest in the 'hood. But I've been advised not to put in a pool because I would "outgrow" the neighborhood.

We bought the biggest house in the neighborhood. All the other houses in the area are around $120k and ours is around $150k. If our house was in a different neighborhood, it would easily go for $180k. We love being in this house because we get the benefits of being in a nice-sized house with the benefits of having down-to-earth neighbors.

Like Ashley, we bought one of the worst houses in our lower-middle class neighborhood 12 yrs ago. Now it's among the best due to the new roof, siding, landscaping, remodeling and other updating we've done. Yet we're "ahead" because even with the housing bubble collapsing our home is still worth twice what we bought it for--it's location in an inner-ring suburb is ideal, and there is still high demand for homes at this reasonable price (ie it's not even close to a "McMansion"!)

I think in older, overall lower-priced neighborhoods like mine, it's all about maintenance. The houses that haven't been maintained are now worth about half what the others are. If you keep up your home, you can't help it--you'll be living in one of the highest resale value homes after 15 yrs or so.

It's a very nice neighborhood, very safe & family-friendly with a nice mix of young couples and retired people, and very ethnically diverse. Approx 25% of the homes are unfortunately wrecks (siding peeling off, etc, usually rental units) but the rest are owner-occupied and have been minimally to very beautifully maintained and remodeled.

We have one of the houses that I'd say is in the middle of the pack. A lot of the houses are bigger, but with the current market, I think the smaller homes are actually selling a bit better and getting more per square foot. We did some significant landscape upgrades after we moved in, but would still need to make some bathroom and kitchen upgrades to be considered 'near the top' if some of the pictures that I'm seeing on real estate listings (yes, I'm nosy) are to be believed.

I think it is a good rule of thumb but there can be exceptions to every rule. We used to have the nicest home in the neighborhood. We didn't mind because we could also rent out portions as it was a house converted into apartments. We could also take over portions we didn't want to rent and make our living space bigger. What we have found is when the housing boom struck our neighbors did a lot of home improvements. Then a house near us in bad shape was torn down for the building of two new houses, both of which are now the nicest houses in the neighborhood. I think in the end our house was an asset because it brought the developers to our block and now looks even nicer with new houses and neighbor improvements. In the long run it seemed to help bring the surrounding neighborhood up.

We just sold a house that could be described as one of the nicer houses in the neighborhood, partially because we made lots of improvements during the 12 years we owned it.

We bought a house for a nearly identical price in a different neighborhood that could be described as closer to the bottom than the top.

But we put our old house on the market around Labor Day, had two offers for more than our asking price before the end of September and closed before the end of October.

So I don't think owning one of the "better" homes in the old neighborhood hurt us. But it was a nice 19th century Victorian in an historic neighborhood in a university town just a few blocks from campus.

I think it all goes back to location, location, location.

We're probably right in the middle, too. Many of the houses on our block added dormers or expanded the footprint in the last 10 years or so. There was a high turnover before the housing bubble burst, and I wonder if we'll see any new foreclosures in my neighborhood.

I always buy a home in the mid to lower end of the pricing for the neighborhood. It's true there will be more demand theoretically for a house on the lower end because more people can afford that price for that neighborhood. The house also has more room for appreciation because its further from the price “ceiling” for the neighborhood. Therefore if you improve a lower priced house you are more likely to recoup the costs from that improvement.

Mine is on the high side, but not horribly so. Mainly just little upgrades like a 2 car garage and brick exterior. A bigger mistake was rushing when my apartment went condo. I didn't want to move twice, but I should have bit the bullet and done so. If I were buying today, I would buy in another neighborhood I like better. But what's done is done, and I have no intention of moving again unless something goes terribly, terribly wrong or terribly, terribly right financially.

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