The knowledgeable real estate professional will understand the boundaries and influences that characterize a neighborhood and will be able to recognize the stage or cycle that a neighborhood is undergoing as well as its future prospects. This knowledge is fundamental to knowing how a property fits into its surroundings and the community and the likely desirability of an area to a given buyer.
Neighborhoods and Boundaries
A neighborhood is a geographically localized community within a larger city, town or suburb. Neighborhoods are often social communities with considerable face-to-face interaction among members, usually feature some sort of boundary lines to distinguish themselves from other areas, and neighborhoods typically exhibit distinctive types, sizes, ages or styles of homes.
Neighborhoods boundaries can be determined in a variety of ways. They can a set of physical geographic characteristics such as roads, rivers, etc., the geographic area served by a particular school or place of worship, or perhaps social bonds where people share similar interests. Availability of and access to employment opportunities might form a boundary. They sometimes are formed around distinctive ethnic or cultural communities where people share similar backgrounds or heritage. Some neighborhoods encompass a single subdivision or development, while others may encompass many. Some are very small in area and others are very large, and some may actually overlap.
Many neighborhoods have associations (voluntary or mandatory) that maintain and enforce regulations or facilities, provide information, or offer opportunities for neighbors to interact. The Austin, Texas area has a large number of neighborhoods and is known for the strong bonds and influence that neighborhood associations have in the community and the grassroots aspect of the political process.
Knowing the boundaries and characteristics of the neighborhood where a property is located is very important in the real estate business, and neighborhood analysis is a fundamental aspect of both sales and appraisal valuation. Visiting neighborhood association websites can be a great starting point to understanding boundaries and other basic characteristics that comprise a given neighborhood. A driving tour will reveal much about a neighborhood as will informal interviews with people who live there. The ideal candidate for knowing the ins and outs of a area is someone who lives there.
Neighborhood Life Cycles
Neighborhoods typically begin in a growth phase as construction begins and continues over time, creating new housing. Growth ends where there is no longer any land available. The neighborhood will usually enter a phase of stability which is characterized by a lack of growth or decline and a period of relatively stable ownership. With advancing age a neighborhood will gradually enter a phase of decline evidenced by deteriorating property conditions, increasing crime rates, etc. and is sometimes combined with a certain neglect of public facilities or infrastructure by local authorities.
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When it is initially created, a neighborhood will be occupied by new owners and renters. As time goes by these original owners sell and move on, to be replaced by others. Over time the condition of the properties will tend to change and deteriorate, and homes there will tend to be worth less than similar ones that are newer. Eventually after many years, as the homes become run down with age or neglect and will tend to attract people of lesser means seeking the most affordable housing. The influx of incompatible land uses or pollution can also lessen the desirability of a neighborhood as can unfavorable changes in the availability of gainful employment or adequate transportation.
There are of course exceptions to this pattern, such as when an older neighborhood is located close to favored schools, transportation corridors, downtown, entertainment, cultural or employment centers that can cause a previously declining neighborhood to become very popular and property values to rise dramatically. Supply and demand are driving forces for property values and can be influenced by such things as financing that favors rehabilitation or remodeling efforts, migration of new residents from more expensive areas, or local population increases that increase competition for available housing. So what may once have been a neighborhood in decline becomes more desirable and sought after. Likewise, neighborhoods that are still in decline may soon realize increasing popularity as economic and social conditions change.
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