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 idiot-proof 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 best features a new homeowner could hope for:
©Daniel R. Patmore/AP
1. 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.
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.
3. Golf Course
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.
4. 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.