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NEIGHBORHOODS MAKE UP THE PATCHWORK QUILT of human settlement. They express our values and culture and define the way we live and work together. Like biotic communities in the natural world, they form the complex patterns that we make upon the land. Neighborhoods are important in real estate because they have a strong influence on property values.
The word neighborhood usually describes a residential area while the word district usually refers to a commercial area. Whether neighborhood or district, the dynamics and principles remain the same.
The neighborhood as we know it probably sprang to life in medieval Europe, where craft and merchant guilds occupied various quarters of the walled city. The guilds built churches, founded schools and defended their section of the wall against invaders. Guild members worked together, ate together and even slept together in common halls.
The medieval city was a collection of self-sufficient neighborhood units and functional precincts. Clerics, scholars and craftsmen each lived in their respective parts of the city and subscribed to a rigorous life of education, training and supervision. During the Middle Ages, people had to belong to some sort of religious, trade or interest group in order to survive.
Today, urban areas throughout the world are still a complex mosaic of distinct neighborhoods. San Francisco has its Sunset, Haight-Ashbury, Twin Peaks and Chinatown. Vancouver has its Gastown and New Orleans its French Quarter.
Neighborhoods exist in rural areas too, but they are usually larger, more diverse and harder to define. Here on the Mendocino Coast we have neighborhoods such as Middle Ridge, Surfwood and East Fort Bragg. Ukiah has its Deerwood, Rogina Heights and Empire Gardens. Other rural Mendocino County neighborhoods include Bell Springs Road, Brooktrails and Greenfield.
Neighborhood Boundaries
Some neighborhoods began as planned developments or subdivisions while others gradually evolved. Physical barriers such as hills, bodies of water and transportation corridors make effective neighborhood boundaries. But the strongest boundaries are often invisible social and economic forces which define neighborhoods by race, ethnicity, lifestyle and economic class. Exclusive upscale neighborhoods keep people out. Poor urban ghettos trap people within.
In the modern megalopolis, neighborhoods and districts have become highly specialized. There are bedroom communities, central business districts, industrial and office parks, college campuses and hospital districts. In the 1960s, the regional shopping mall emerged as the new urban downtown. Williamsburg, Virginia and Mendocino, California are among a small number of officially-designated historic districts.
The most healthy and stable neighborhoods include a diverse mixture of land use, age groups, income levels, ethnicity and lifestyles. In human society as in the rest of nature, diversity creates stability. Exclusive and special-purpose neighborhoods are inherently unstable because they appeal to narrow markets.
Conformity, Progression and Regression
The principle of conformity causes value to be created and sustained when properties conform to market demands. The principle of progression raises the value of properties which are under-improved for the neighborhood. The principle of regression lowers the value of properties which are over-improved for the neighborhood.
For example, If someone builds a large expensive house in your neighborhood, your property value will likely increase. This is the progression principle in action. However, the person who builds the expensive house is hit by the principle of regression, which causes his or her property value to decline toward predominant neighborhood property values.
The economic lesson for the average homeowner is “don’t over-improve for the neighborhood.” Take a good look at your neighborhood before you remodel or build. If you improve beyond what is typical for your neighborhood, don’t expect to recover much of your investment very soon. If you really need a bigger or better home, consider moving to a neighborhood where that type of house is the norm.
There is a more important economic lesson here for civic leaders. Mixed land use raises overall property values. Good planning discourages exclusive neighborhoods and helps promote diversity and stability.
Southern California developers learned a long time ago that they need to mingle some entry-level homes along with the higher value homes. As the entry-level homes appreciate in value by association with the higher value homes, their owners are able to “move up” and buy more expensive homes. The developers were helping to create future home buyers. Putting all the low cost housing in one neighborhood prevents people from riding up on the “equity escalator.”
The Neighborhood Life Cycle
Neighborhoods are constantly changing. Market value is influenced by the type of change which is occurring at any particular time. Neighborhoods typically go through the four stages listed below, called the neighborhood life cycle.
- Growth – a period during which the neighborhood or district gains favor and acceptance in the local market. Property values increase.
- Stability – a period of equilibrium without marked gains or losses. Property values remain the same.
- Decline – a period of diminishing demand. Property values decline.
- Revitalization – a period of renewal, modernization and increasing demand. Property values increase.
The neighborhood life cycle is related to the natural aging process of buildings and other improvements. The cycle is also affected by supply and demand in the local real estate market and other forces outside the neighborhood.
Gentrification is a process which can trigger a revitalization cycle. This occurs when affluent buyers purchase and rehabilitate old or run-down properties and displace lower income residents. Gentrification typically takes place in urban areas, but it is also occurring in rural areas of Mendocino County.
Blockbusting is an unethical practice which can trigger a decline cycle. Real estate speculators induce panic selling by exploiting racial prejudices within a neighborhood, making people believe that the racial or ethnic makeup is changing and causing them to sell below market value.
Large public investments can also revitalize surrounding neighborhoods. The construction of the Pelican Bay prison in Crescent City boosted local property values. Likewise, military base closings in Southern California and Sacramento contributed to a decline in property values.
The dawning information age will probably have a profound effect on neighborhoods. As business becomes less dependent on location, the work place will move closer to the home. In fact, millions of workers are already working directly out of their homes on a full- or part-time basis. Former bedroom communities will demand a wider variety of services within walking distance – markets, restaurants, shops, small offices and meeting places. General plans and zoning ordinances will have to change to allow mixed uses regulated by performance standards (noise, traffic, appearance, etc.) rather than by arbitrary land use categories and definitions.
The New Urbanist Movement
People yearn to live in real communities again, although most of us have no memory of what they were like. Modern planners who subscribe to the “new urbanist” movement are promoting the type of neighborhoods which existed in this country prior to the 1920s, before the automobile drastically altered the way we live. Their ideal neighborhoods include houses with front porches (but no lawns), old-fashioned alleys, narrow streets, low-rent apartments over garages, lots of parks and the whole spectrum of human activities within walking or bicycling distance.
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Chet Boddy, Real Estate Appraisal, Sales and Consulting
43300 LR Airport Road, #59, Little River, CA 95456
707-937-4011, office
707-937-4818, fax
chet@chetboddy.com
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Copyright © 2002 Chet Boddy, All Rights Reserved
Chet Boddy is a Certified General Real Estate Appraiser, Realtor“ and real estate consultant who has lived on the Mendocino Coast since 1976. Look for this and other real estate columns on Chet’s web site at www.chetboddy.com
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