During the economic downturn of the early 1990s, a home in the Crocker Highlands area of Oakland, Calif., sold twice in two years. The house did not change substantially during this time, nor did its price. But, average prices in the neighborhood dropped about 15 percent during the same time.
Some homes hold their value better than others. It makes sense to pay particular attention to what you buy and where if you're worried that the housing market is overdue for a correction.
What did the Crocker Highlands home have that caused it to be more desirable than other listings? It had a good floor plan. There were four bedrooms on one level. The master bedroom had its own bathroom, and there were two additional bathrooms.
The house was an older home, built in the 1920s, but it had been extensively renovated with quality, high-end finishes. There was no deferred maintenance. It had a spacious eat-in kitchen/family room that opened directly out to a level, private and sunny backyard. It was a house that was easy to live in and it required no work.
The house was also located on one of the best streets in neighborhood. What made it such a desirable street? It was not a thoroughfare, so the traffic was minimal. It was quiet. Yet, it was within walking distance of the local school. The street was virtually level so children could ride bikes and it was easy for homeowners to get in and out of their driveways. There was plenty of street parking for guests.
This is not to say that you shouldn't buy a home unless it includes all the desirable qualities of this particular Crocker Highlands home. However, it does make sense to keep resale value in mind when you're considering a home purchase, particularly if you don't intend to stay there forever.
Other attributes that tend to add to resale value are good storage space, a garage, a bathroom on each level and a convenient location. Good views tend to add value, and so does easy access in and out of the house.
One-level homes are usually in high demand, especially with older home buyers. Two-story homes are often preferred by younger buyers. Homes that are on three or more levels tend to sell for less than a similar sized home with only one or two levels.
It can be difficult to find a home with a good floor plan, good indoor-outdoor living and the right number of bedrooms and baths that is also in top condition. If you're up for the challenge, consider buying a home that you can improve over time. But, first make sure that the basic structure is sound and the floor plan is good.
Also, get a handle on how much you'll need to invest in the property before you start negotiating with the seller. Don't pay an inflated price for a house that needs work.
Location is one of the most important indicators of value in residential real estate.
Neighborhoods with good public schools tend to have higher property values than areas where schools are a problem. Close proximity to a major metropolitan area has a positive effect on home values, particularly if there's good transportation.
Neighborhoods where the residents are predominantly owner-occupants tend to be more desirable than neighborhoods where most of the homes are owned by absentee landlords.
THE CLOSING: The local economy directly affects home values, and so does supply and demand. Areas with a lot of building can end up with a glut of homes for sale when there is a correction in the housing market. This can depress local property values.
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