If you’ve been in and around the real estate world for long, this phrase about location will eventually come up. What does it mean if we are interested in selling or buying real estate? It’s so important, its repeated three times….for a reason. As real estate is one of the biggest investments most of us will ever make, lets talk about the concept of location and how it fits into our decision making process.
I’m going to unpack this concept in three different ways. 1) The location within the immediate area, i.e., how your home is sited on your lot, the location within the street and the location in the neighborhood, 2) the location within the larger community, i.e., the neighborhood, the proximity to amenities and schools, the location in Tucson, and 3) in terms of what it means to commit your purchase within southern Arizona. Because truly, each of these, does impact your purchase in different ways, but expanding your decision making process to include all three, makes a difference! While the ideas here can be applied to investment and commercial properties, for the purpose of this discussion, we are going to focus on residential property. The same is true for what our motives are for buying and selling. For example, our family is growing, we’ve switched jobs, we are retiring.
1) Location within the immediate area.
Let’s examine the ‘location’ elements of your property, beginning with placement on the lot. Is the home placed in the center of the lot? Is there mature vegetation? Do you have pleasant views out the windows? How close are your neighbors? Is there a sense of privacy or is it open and welcoming to passers by from the street? Is your lot bigger or smaller than your neighbors? The next aspect is what is the location of the home in your neighborhood? What does your house face? Is it next to a park, a shopping center, on a corner or a busy street? Does it back up to open space? Is it on a cul de sac, or within easy access to a main exit? Is there a change of zoning right next to you or are you near some kind of hazard, noise pollution, or smell? These are all factors we observe and make note of whether we are conscious of it or not. And there are price adjustments for this set of location criteria.
An obvious example of this is view. Most of us will pay more for a good view. And when we sell, the next person will likely pay more for this view too. And while we might pay more for the view, the thing that is not so obvious, is that we are also creating financial security for our investment. Another example are homes located next to or on busy streets. Fewer people are willing to purchase a home with this condition. Financially that translates into the home taking longer to sell, and you will likely have to discount the price compared to your neighbor. In a market correction, when there is a smaller pool of buyers, your investment may be less secure.
2) Location within the larger community.
real estate collapse of the great recession of 2008, I performed Broker Price Opinions (BPO’s) for Freddie Mac. It was a devastating time to witness boots on the ground effects for homeowners in Tucson. I learned a lot about location. The job required me to travel to all parts of Tucson and gather data on homes that were being foreclosed. I looked at houses in all economic levels and in all areas. The most important thing I learned was how much the location of these homes impacted the devaluation. While the crash followed a rapid escalation of home prices, the percentage of devaluation was not the same throughout the city.
For example, one of the most popular neighborhoods in Tucson is called Sam Hughes. This highly desirable area saw a decease in values of about 25-30%. Sam Hughes is directly east of of the U of A (one of Tucson’s largest employers) and a central location to major traveling arteries (Speedway, Campbell, County Club and Broadway). Therefore, it is close to public transportation, medical facilities, restaurants and shops. Other areas I performed BPO’s were further out of the central area of town. I worked in all directions, with newer and older homes, condos, and townhomes. What I noticed is that the further homes were from the center to town, the higher the devaluation. I performed BPO’s that had devaluations of 70-80%! While there are many factors and variables connected with this statistic such as the condition and age of the home, location in the community, etc. the striking factor was that the central part of town was holding better values than areas further out.
3) Location within Southern Arizona
This last look at location is a much broader topic. This requires a set of metrics to create a context for discussion. Next month, I will talk about what it means to sell and purchase homes in Tucson and Southern Arizona.
In the meantime, please contact me to talk about the location of your home. Or if you are thinking of buying a home, lets talk about how location can be used to your best advantage.