When buying a home, you have to consider the state of the neighborhood. Just as importantly, you’ll have to consider how that neighborhood might grow over time. This can be tricky to accomplish, since neighborhoods tend to develop in sometimes unpredictable directions, but if you approach this right, it can benefit you massively.
Why Look for a High-Growth Neighborhood?
Up-and-coming neighborhoods are a long-term homebuyer’s ideal situation. Essentially, this means the neighborhood isn’t currently in perfect condition. It may have a higher-than-average crime rate or may be lacking certain amenities. But it also has a lot going for it, and over the next several years could easily become one of the hottest neighborhoods in your city.
There are several advantages to this approach. You’ll tend to get a home at a lower price in an up-and-coming neighborhood like this than you could in a neighborhood that has already reached peak popularity. Then, you’ll stand to see a better rate of return; as average home values rise across the board, you’ll see a much higher return on your investment.
The important question is, how can you find an up-and-coming neighborhood worth investing in?
Signs of an Up-and-Coming Neighborhood
First, you’ll need to look at the current home prices (as well as the reputation of the area). If the houses look affordable, and the area isn’t hugely popular with people, you can consider it in a lukewarm state. If it has an absolutely terrible reputation, or if home prices are dirt cheap, you may be waiting too long for the neighborhood to turn around. If the area is already overcrowded, you may have missed the opportunity. You’re looking for a nice middle ground, with reasonable prices and some moderate rumblings of popularity.
From there, you can look for these signs that a neighborhood is poised for significant growth in the near future:
- New transit systems or upgrades. Look to see if there are new public transit systems being installed, upgraded, or otherwise improved. Transit systems serve as an indication of two major trends. First, they’re a reflection of demand; if the city notices an increase in the number of interested riders in an area, they may invest in better transportation there. Second, they attract more people; public transit is a major point of interest for many homebuyers, so this could start a wave of new home owners.
- Rising rent prices. Rent prices tend to fluctuate quicker than home prices, since they’re a snapshot of current demand (and since tenants come and go more frequently than homeowners, as a general rule). Pay attention to rent prices in your area; if they seem to be rising consistently, it’s a sign more people are moving here. If there’s a sharp rise in rent prices, with home prices remaining similar, it could be a perfect time to strike.
- Artist and musician favoritism. Though a bit more of a subjective factor, pay attention to where the artists, musicians, and other creative types seem to be gravitating. Creative people tend to breathe life into a given area, increasing its appeal and therefore, its demand. While this isn’t always true, hipsters like this can be a great early warning that a neighborhood is about to take off.
- Young people and demographic shifts. Similarly, watch where the young people go and pay attention to new demographic shifts. Young people immediately out of college tend to go for areas that are both inexpensive and close to job opportunities, so they flood to low-cost areas and end up driving up prices (and quality of life) in those areas. If there’s a sudden shift toward younger demographics in an area, it could be a sign that the area is poised for further growth in the near future.
- New job opportunities. Speaking of job opportunities, this is one of the best indications of a neighborhood’s potential for growth. People don’t generally move to an area unless they’re sure they can find work there, or unless they already have a job lined up. If there are bigger job opportunities in the pipeline, you can bet demand is going to skyrocket in the next several years. Pay attention to big firms or corporations setting up shop in or around this neighborhood.
- Major retail locations. Similarly, look for new installations of major retail chains like Costco, Walmart, or other chains like Starbucks. Big companies like these tend to do millions of dollars’ worth of research before investing in a new location. If they’re constructing a new building here, it means they see some enormous potential growth on the horizon. You can piggyback off that future sight, banking on their research being accurate. In combination with some of the other factors on this list, it’s an impressively positive sign this neighborhood is about to grow.
- School system improvements. It can be hard to tell that a school system is improving, especially since progress tends to be gradual, but pay attention to school system improvements as well. If test scores seem to be consistently rising, or if the administration is investing in building and staffing improvements, it’s a sign of good things to come.
- Proximity to other hot locations. You can also consider an area’s proximity to other “hot” locations. There tends to be a spillover effect from in-demand neighborhoods; people flock to a given area, but when prices start to get too high, they start looking at areas adjacent to that area. Accordingly, new neighborhoods start getting peripheral boosts in visibility and demand, sparking a chain reaction that creates new high-growth opportunities for homebuyers.
If you’re looking for some of the best up-and-coming neighborhoods in and around the Katy, Texas area, Green Residential can help you. Contact Green Residential today to get access to some of the best real estate experts in the area, and get the assistance you need to buy the perfect home.
Michael is Green Residential’s Vice President. He helps to keep the team organized and running smoothly. Prior to joining Green Residential, he spent 12 years working at Cadence Bank in the mortgage loan servicing department, where he specialized in loan audits, modifications, and bankruptcy-related issues for the mortgage portfolio.
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