The Housing Chronicles Blog: Now more than ever: choosing the right zip codes

Saturday, March 15, 2008

Now more than ever: choosing the right zip codes

Even with the housing slump, more than six million homes will be sold this year, so it's especially important for potential buyers to conduct as much research as possible. According to a story in the Wall Street Journal, paying attention to school scores, analyzing supply and demand and staying away from neighborhoods with higher-than-average foreclosure rates are a good place to start:

Some six million Americans are expected to buy a house this year. Whether first-time home buyers scouting the Chicago suburbs or a midcareer worker relocating to Denver, they are all contemplating what may be the most significant purchase of their lives at a time when no one is certain how much lower prices might go.

If you are relocating for your job, you likely can't pick which region you move to. But you can pick where you live within that region, and that could have a big effect on whether or not your home turns out to be a winning investment...

One factor is well-known to home buyers: schools. Even if you don't have children, houses in high-ranked school districts generally retain their value better.

But don't overlook perhaps the most important variable of all: supply and demand. With the exception of cities such as Detroit, where housing markets are weakened by ailing industries, prices are tumbling hardest in places like Phoenix or Miami or Las Vegas, which were smothered in recent years by new construction. If you are moving to one of these cities, be wary of areas where lots of new homes are soon to be built or scheduled to go on sale soon...

Though buyers generally get more house for their dollar in more-remote communities, many buyers today are forsaking size for the conveniences of being close to the city, often in areas that are redeveloping...

Neighborhoods with significant numbers of foreclosures also typically suffer weaker housing prices. In Herndon, Va., an otherwise desirable metropolitan Washington community, "there are pockets of town where foreclosures are a problem, and that is undercutting prices" of nearby homes, says Stephen Fuller, director for the Center for Regional Analysis at George Mason University. "A couple blocks west or north, and you don't find that problem."...

Don't forget that home buying is always a street-by-street exercise, and that is particularly true in a weak market. In a strong market, buyers scarf up homes on busy streets or less-than-desirable locations. But in a down market, things change. Just about anything sold in the hot market of 2004 and 2005, but now "it's location, location, location -- more than ever," says Lori Dahl, an agent in Summit, N.J., with Burgdorff Realty ERA.

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