Hot Block, Cold Block
The American housing market has slowly been clawing its way back to pre-recession levels. Not every neighborhood is recovering at the same pace, however.
Potential buyers look for areas and properties that are affordable, safe, and have good school systems, the annual homebuyer profiles compiled by the National Association of Realtors show. Other factors — such as proximity to jobs and public transit — play into their decisions as well, resulting in cities and neighborhoods with an uneven distribution of property values and sales. Here’s a look at a few of the factors driving on-the-ground housing trends in three notable metropolitan markets.
Families are drawn to the Windy City. A recent study by United Van Lines found that more families moved into Chicago during the summertime than any other American city.
The average single-family home in the North Park neighborhood of Chicago sold in 46 days in the first four months of 2014, according to the Chicago Association of Realtors and Midwest Real Estate Data LLC. The North Park area is more affordable than Lincoln Park, according to Trulia data, with a median sales price of $250,000 in North Park and $355,000 in Lincoln Park. But sales are still hot no matter what the price, says Nicholas Signorello, owner of Signorello Realty in Aurora, IL.
“What I’m seeing is that anything in that higher priced, luxury range is extremely hot,” says Signorello. “At the same time, the cheaper you get under $200,000, the more sought after that property is simply because there’s not a lot of inventory out there in that price range.”
Those homes listed in middle ranges, however, are not selling well simply because they’re unaffordable for the people who would otherwise want to buy them, Signorello added.
“The wealthiest people are making more money and doing really well right now, but income for the middle class isn’t going anywhere,” he says. “As a result, those middle markets are languishing.”
Neighborhoods like Garfield Ridge, Mount Greenwood and Rogers Park, contain many of those middle-of-the-road properties. Those areas are generally safe, but there can still be an element of crime, Signorello says, which influences the price. One extreme case of this phenomenon can be seen in Canaryville and Bridgeport, which share a dividing line. Since August, properties in Bridgeport were $52 more expensive per square foot than in Canaryville — the tougher of the two neighborhoods in terms of crime (in October 2007 there were 314 quality of life crimes in New City, the area where Canaryville is, as opposed to 67 of those crimes in Bridgeport in that same time period, according to the Chicago Tribune). As crime drops and reputations improve, however, neighborhoods could become more popular, Signorello says.
That was the case with the site of the former Cabrini-Green public housing development, which was notorious for its high crime rates and was demolished in 2011. Today there is an explosion of development (and building proposals) in the Cabrini-Green area, including a 47-unit townhouse project by the Ranquist Development Group.
“That North Side neighborhood has appreciated since then,” Signorello says. “It’s turned around quite a bit.”
New York City
New York City’s real estate market occupies a wide spectrum of costs. The average sales price per square foot for an apartment in Manhattan is $1,363, according to Douglas Elliman Real Estate. But the price per square foot in Bushwick, Brooklyn is $608, according to Trulia. While comparably cheaper than Manhattan, the fact that average prices have jumped from $458 a year ago shows how certain neighborhoods in Brooklyn have metamorphosed from deserted no-man’s lands to the newest hot spots for developers and buyers, according to Michael Sargent, a real estate salesman at Citi Habitats.
“It’s sort of the wild, wild west out in Brooklyn right now,” says Sargent. “It’s amazing how quickly those neighborhoods are changing and gentrifying.”
Areas like Williamsburg (where a 100-year-old warehouse was recently converted into loft rental apartments) and Crown Heights (where two dozen residential projects are in development) have gone from edgy to popular.
“Growth is in the areas that were more industrial and are now changing to residential,” Sargent says. “What I’m seeing now is a case of ‘if they build it, they will come.’”
Some cities are benefitting from a renewed interest in urban living — perhaps none more so than New Orleans. Among cities that grew faster than their suburbs between July 2010 and July 2011, New Orleans recorded the largest growth, with a 3.7 percent gain.
The population growth has also translated into an increase in home prices. The average price of a home in New Orleans in 2013 was $325,348, nearly an 8 percent increase from 2012, according to the New Orleans Metropolitan Association of Realtors. Fret not — you can buy nine homes in New Orleans for the price of a single home in Silicon Valley, CA, Nola.com reports.
Affordability — tied in part to flood risk — is a major driver behind home sales today, says Rick Haase, president of Latter & Blum Inc. Following Hurricane Katrina, insurance premiums for some properties skyrocketed from $1,500 to $15,000 per year.
And the legacy of Hurricane Katrina looms large over parts of New Orleans, such as St. Bernard Parish, which was hit hard by the flood.
St. Bernard today has 32 percent fewer people than when it did in the pre-Katrina years of 2004-2005, according to Census data. Fewer people means higher taxes — residents there are paying 30 percent more in taxes for municipal services, according to Nola.com. The threat of future flooding also weighs heavily on homebuyers’ decisions.
“Irrespective of insurance, people want to know, ‘Will I be protected?”’ Haase says. “Strength of flood protection has greatly affected the pace of recovery in individual markets.”
Another deciding factor for many buyers is schools, says Haase, with Louisiana ranked 48th for national school performance. “Buyers ask me every single time, ‘Where will my children go to school?’”
On the whole, however, “New Orleans proper is going through a renaissance like most people who have grown up here have never seen before,” Haase says. “The state of jobs and economic development is fantastic, and the real estate market is enjoying that, too.”