Posted by Hank on January 20, 2003 at 20:28:22:
The other danger is all of the really bad drivers in that city.
Interesting question about home values… - Posted by Corey ND
Posted by Corey ND on January 19, 2003 at 20:12:33:
OK here goes.
I have been researching real estate investing around different areas of the country. BUT I can’t seem to put my finger on how homes are valued in an area or city. I will use 3 examples I have come across: City (A) Is a rural Midwest town of about 16K average home price of about 60K, economy is poor but not horrible, home values are steady with little appreciation. City (B) Major metropolitan Midwest city of 1-2 million, Average home price of about 165K, strong economy but has slowed a little, homes are appreciating between 7-10% a year. City (C) Mid sized city of 400K in the southeastern US, Average home price of about 65K, strong economy, growing area, appreciation of about 10-12% a year.
SO my question is this what has ever determined the going price for homes in an area? I know several things can influence home prices such as local wages, property taxes, growth area, state taxes, etc. I know this may be kind of a philosophical question, but is there a good explanation that a common investor could understand?
SO put on your thinking caps and come up with answers.
wonder how RE market is in Altoona,PA! (nt) - Posted by Eddy (CT)
Posted by Eddy (CT) on January 20, 2003 at 19:27:31:
.
Location, Location, Location - Posted by JD
Posted by JD on January 20, 2003 at 12:50:18:
Proximity to desirable atributes (work, entertainment, shopping, view, ski slopes, ocean, park, security, quiet, school, rich people, etc…) makes a property more valuable. Proximity to undesireble atrributes (traffic, noise, pollution, crime, poor people, etc…) make a property less valuable. Supply and demand determines the dollar value of each of these factors.
So in conclusion… - Posted by Corey ND
Posted by Corey ND on January 20, 2003 at 10:17:44:
This is a much bigger issue than just words can explain on a post here. Now mind you I COMPLETELY understand the standard rules of real estate as far as location, demand, the economy, etc…
I think maybe this is an issue that to fully understand one could take a complete college course for. I guess that is why they have economists (and they don’t always agree what is correct).
I think maybe I got caught up in too much deep thought and wanted to know why the world was round.
Thanks for the feedback.
Re: Interesting question about home values… - Posted by GL(ON)
Posted by GL(ON) on January 20, 2003 at 09:55:07:
It is basically supply and demand, plus a certain psychological factor.
If you had a big enough computer I suppose you could input all the data from every employer in a 50 mile radius, divide by the number of people employed who need housing(not forgetting dogs cats and childred)blah blah blah. But it is really not necessary.
If you live in an area you will have a feel for what is going on, and you can bet prices will reflect all the factors influencing them.
The X factor is psychology. There are times when real estate investing is hot and times when real estate is stinko and real estate investing is double stinko. It’s not hard to tell which is which if you read the papers and listen to your friends conversation. If you really want to be sure what time of the market it is, make up an example of a real estate investment that is a real steal and go around offering it to people, if they act as if you are offering them poison it’s safe to invest, if they act all sophisticated and eager you know the boom is running its course.
Then you depend on the market’s tendency to correct itself.
This all sounds very vague and unscientific but it isn’t. Once you learn to spot the signs it is as easy as telling a good neighborhood from a bad neighborhood, even though you may not be able to come up with a hard and fast definition.
Re: Interesting question about home values… - Posted by Bill
Posted by Bill on January 20, 2003 at 07:00:26:
Corey,
I’ll take a try at this.
If only it were so easy that there was a formula you could just plug in—I think despite all the info that could be gathered, there is still the factors of human choice involved. People just like what they like and we’re all different to a degree.
I analyzing different areas, once you take out personal preferances and quirks, there seem ,to me, to be several factors that continually keep popping up.
they are, in no certain order,
available land for new building
new building activity- building and zoning rules
highway access, especially 4 lane highways
schools
crime levels
family income
job availability and available pay levels
preceived desireability of the area.
I’m sure there are more.
I’ve lived in many different areas of the country and have first hand observational knowledge of these factors at work.
Let’s look at a few examples:
Santa barbara, Calif: Population 150,000.Available land=almost zero;building activity=strong on available land, many upper end remodels,little or no low end activity;highway access=excellent-freeway right through the middle of town;schools=good to excellent;crime levels=low; family income=high for most;jobs available and pay=many and good;preceived desireability=10-the American Rivera-as good as it gets; housing prices and appreciation=as high as it gets.
Miami, Fl. Population=2.5-3.5 million Available land=moderate; building activity strong in middle price areas;highway access=good-several freeways; schools=terrible-aside from Coral Gables, you need to send the kids to a private school; crime levels=high (you need to carry a gun here, no lie); family income=moderate to average;job availability and pay levels=moderate to average;preceived desireability=low, except for Coral Gables and possibly South Beach. Prices Moderate, except for Coral Gables and South Beach (these areas have higher desireability)Appreciation=low to moderate in most areas.
Small rural town (you pick the state)-Population
Re: Interesting question about home values… - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on January 19, 2003 at 22:20:12:
Corey–(ND)--------------
I don’t think anybody knows for sure. You might want to study some books on appraising, especially those for college classes.
I see people assuming or stating that the price of houses is determined by the average family income in the area. I always figure that the supply/demand balance must have an influence. I read one academic study that showed that the further properties were from the central downtown business district the lower priced that they were.
I think that there is no foruula that can tell us what property values in an area might become in the future. I’d love to have such a formula so I could project future values in low-priced areas and buy where the prices will go up the most.
Maybe Robert Campbell will give you his thinking on the topic.
Good InvestingRon Starr*
Sorry to dissapoint you, but … - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on January 20, 2003 at 16:18:27:
Corey–(ND)-------------
Sorry to disappoint you, but I think that the world is not Round. Not flat either, sort of in-between. Of course, where you are it looks flat so you have to take on faith that the world is near-round. Now you probably do have to have some deep thoughts to think about that.
The Rand McNally books “Places Rated Almanac” and “Retirement Places Rated Almanac” discuss some factors that make places attractive to people and to retirees. A lot of the factors are those mentioned by Bill(FL). They also include house prices as a negative: high prices are bad for an area, they say. Of course, as Jack Reed points out, housing prices are high because of strong demand to live there. So they have it backwards on housing prices, obviously.
Good InvestingRon Starr***********
Miami and guns - Posted by michaela-ATL
Posted by michaela-ATL on January 20, 2003 at 07:53:18:
Bill,
when i was about to move to miami from germany (i moved jan '82) everybody was telling me how dangerous miami is and how everybody needs to have a gun. i never saw that part. I ddin’t have a gun and lived there nicely for 2.5 years. Granted, i didn’t spend a lot of time in overtown, but i still never kept myself from driving anywhere. I was all over the city. The worst, that happened to me in 2.5 years is, that my wallet (and other people’s as well) was stolen at a private party. I think false perception and rumours unfortunately have so much to do with desirability. Unfortunately, people hear one thing and the word spreads, along with assumptions and before you know it an area is ‘persona non grata’. I have this all the time: I live in an intown neighborhood, called grant park. How often, in the past 12 years, have i heard suburbanites ask: there’s so much crime in town, aren’t you scareed living there? No, i’m not. It’s common sense stuff: don’t leave things laying in your car, that invites people to break in, and you’re fine.
Basically, my point is, that a lot of times false assumptions (that miami is only possible, if you have a gun) can make or break an area unjustifiedly.
michaela
Ron… - Posted by Corey ND
Posted by Corey ND on January 19, 2003 at 23:19:08:
This is exactly the type of thinking I was looking for. Not the standard canned answer of location, location, location.
Re: Sorry to dissapoint you, but … - Posted by Nate(DC)
Posted by Nate(DC) on January 20, 2003 at 19:54:33:
Well, Ron, the less desirable areas need to come up with some kind of selling point, so they can at least say “but the housing’s cheap!” And it is…if that’s all you care about 
NT
Re: Miami and guns - Posted by Bill
Posted by Bill on January 20, 2003 at 18:26:20:
Michaela,
I’m glad to hear you had no trouble in Miami. I lived there from 1990-1996 and had quite a different experience. I can personally tell you without exaggerating that from our house, which was in a NICE area south of Miami, (on the edge of the Redlands)an area of 1/2 to 1 acre executive type housing, surrounded by CPA’s, stockbrokers, doctors, etc., that you could hear full automatic weapon fire every night of the week. Gunfire at all hours of the day. Murder rate at dthet’s the ones they found. Bodies in the canal’s every week or two, often chopped up and in barrels. Running gun battles on the main highway occasionally. Bodies chopped up in dumpsters on Miami Beach and never making the news (wouldn’t want to alarm the tourists!), many old people driving around with their guns on the seat or dashboard in easy reach. Just drive south out ofMiami downtown, and you’ll see all the lights go to blinking at dusk. No one dares to stop at a red light after dusk because of the carjackers. Cops don’t even write tickets for running red lights. You slow down as you approach and if there’s a gap in traffic, just run it quick. To even think of going into an area like overtown is suicide if you’re a minority(white). So many tourists were getting killed there in the early 90’s that they had a saying “dead German tourists” to describe them. I remember sevaral particularly bad ones. As you come out of the Miami airport and onto US 95, it’s easy to get confused and lost. If you take an exit near the airport to look for help, you’re in overtown and in big trouble.
All this is not to mention the high number of home invasion robberies where they follow you from the mall and then several of them break in and tie you up, rape you and kill you often as not. (Sorry to sound so off the wall, but it happened to several people I knew).
Drugs everywhere. Ripoffs everywhere.
On the positive side, there were some nice areas and some genuinely nice people.
Having been through it, I can say, however, it’s NOT like they portray it on TV. I did carry a gun-everywhere. And so did most people I knew, even old retired people.
Re: Miami and guns - Posted by James B.
Posted by James B. on January 20, 2003 at 16:33:30:
You are so right with what you just said. So many times I hear people spread wild rumors about “so called bad neighborhoods”, only to find our that in reality it is not as bad as everyone says. In all big (over 500K) cities there will be bad, average, and great neighborhoods. It is ridiculous to suggest that the only way to survive in Miami is to carry a gun. Come on now.
jb
Re: Miami and guns - Posted by IB (NJ)
Posted by IB (NJ) on January 21, 2003 at 11:10:21:
Carjackers, dead chopped up bodies, kidnappings and rapings - sounds like complete lawlessness to me.
And Doctors, CPA’s, etc. continued to live there?! In my experience, the only people who lived in areas like these were those who HAD TO.
So what’s wrong with this picture?
Re: Miami and guns - Posted by michaela-ATL
Posted by michaela-ATL on January 20, 2003 at 20:34:02:
Bill,
I’m sorry, but this sounds too dramatic to be realistic. I used to work at the airport and never ended up in overtown by mistake, as a german foreigner. I lived south of miami, in kendall and never heard any gunfire or saw dead bodies etc. I’m not one to be scared and stay away from certain areas and i’ve been all over the city. I have since taken several trips back there without any problems.
You’re either a bad luck magnet (in which case i wouldn’t want to be caught anywhere near you) or your bad experiences have gotten worse in memory and now you’re trying to give miami a bad rep. No city can possibly be the way you describe miami.
Are you sure you didn’t live in Colombia, maybe 