How to Find the Next Hot Neighborhood

Househappy —  December 26, 2013 — Leave a comment

Hawthorne District, Portland Oregon, via Kyle Burris

Inner-city neighborhoods are becoming more gentrified. From Echo Park in Los Angeles to Bishop Arts District in Dallas to Prospect Heights in New York, urban pioneers are turning these areas into neighborhood hot spots.

“It’s all part of this cultural shift toward living in urbanity, getting things in an urban area you can’t get in the suburbs,” says Paris Rutherford, a Dallas-based developer who works on urban revitalization projects. “And that’s obviously driving a lot of new investment all over the country.”

The hard part it seems is how exactly these homeowners and real-estate investors find a neighborhood that is becoming more livable and where home values will rise over the long term.

Characteristics have been found that help pinpoint an urban area as being gentrified. Median household incomes are rising along with a significantly faster home appreciation compared to the city average and the government is investing in local infrastructure.

Many times people will move into neighborhoods near ones that have been gentrified hoping that there is a higher probability that this one will too. This sort of “halo effect” has worked for many areas such as Logan Circle in Washington D.C. However, this type of outlook is also risky since sometimes the neighborhoods don’t end up flourishing even if they are in proximity with more prosperous areas.

Checking out the local retailers is a great way to see if the neighborhood has potential. When the stores start selling more higher-priced items, this can mean there is an increase in the household incomes of the neighborhood residents. In addition, it can be a good sign if lots of new retailers are opening stores in once vacant spaces.

Looks matter a lot, too. Older homes tend to have more character and people are attracted to their potential. “You need a neighborhood that has good bones,” says Jonathan Butler, founder of a real estate website in Brooklyn, N.Y. Renovations and construction are other positive signs that homeowners and the government are investing into the growth of the neighborhood.

Lastly, looking at the numbers and economic data will give you the straight hard facts. A neighborhood with close proximity to available jobs is guaranteed to far better than one with not enough jobs for new residents.

Source: WSJ

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