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A personal perspective on an application of basic real estate principles that affect the value of new in-city homes in conforming communities

By
Real Estate Agent with GreenWorks Realty

Originally posted at Green Spaces Real Estate blog  High Point is a Built Green Certified Community. Wendy Hughes-Jelen holds the designation of Built Green Certified Professional: Real Estate.

"Before I lived in a master planned community, and even longer before I became a real estate professional and began to understand the driving forces and governing principles of the housing market, I had no respect for suburban developments full of houses that all looked so similar but slightly different that I thought the builder had to think we were idiots to not know there wasn't a house exactly like *that* one 5 houses down. A friend of mine bought a house in an Auburn community in 2000, and I shook my head and still didn't really get it - why someone had to drive to Auburn to live in a house in a neighborhood that had sidewalks (the big thing that her husband wanted).

I certainly don't believe in driving out to the country to live in a community with sidewalks. You can get those right here in the city. Any city or town, actually. But some people really want to live out in the "country". There will always be people who want to live in big developments in the suburbs. I grew up in the country, 10 miles from the nearest town, 3 miles off the highway, and no such thing as bus service. My folks had 5 acres, and there were no suburban developments at the time (late 70s).

Country living, been there done that. I *like* living in the city - if you can call West Seattle the city. It is within the city limits but it really is like a small town all its own. When my husband and I bought our first house here its as if we were still hanging on to our roots but with an "in-city" compromise. We bought a 1929 farmhouse on a 1/4 acre lot, on a street with no sidewalks and few street lights. There was an elementary school a couple of blocks away, and a major community college a half mile away. It was within two blocks of the bus line, altho I never rode the bus (having grown up in the country, I never really learned how to use mass transit, and the few times as an adult I rode a public bus I got extremely motion sick). After almost 6 years there, having decided we were going to remain child-free and having become disenchanted with how much work a 75 year old house and really large yard and garden were, we finally looked at each other and said why are we doing this? Shortly thereafter we "sold out" and moved to a master planned community, albeit it was only a half mile away and still in the city. I am referring to High Point.

Not only did we move to a community with an HOA, we even moved into a subassociation that was a condominium. We have NO yard and are glad for it. We can't touch the landscaping out front and we are glad for it. We are free. We just celebrated our one year anniversary in our townhome and are still extremely happy we made the decision to move into a community with "rules". The homes that do have yards are small and manageable. Most of the landscaping and all of the parks are maintained by a service.

There is a lot of architectural variety here, but admittedly there are repeats of building plans frequently. Color changes can sort of hide the similarities, and flower pots certainly liven up the front porches on every street.

Why was this a smart move?
Altho we are taught to rail against conformity in our personalities, clothing style, and other parts of our culture, the principle of conformity when it pertains to real estate actually increases the value of homes within conforming neighborhoods. When all the buildings in a given area are of similar design, age, size, maintenance, and market appeal, value increases for everyone because the neighborhood is aesthetically pleasing due to its conformity or consistency.

The principle of progression refers to higher values attained when structures conform to each other. For example, a new home that appeals to current market preference is worth more when it is surrounded by other new homes in line with the current market preference.

The principle of regression refers to how ill placement or a lack of conformity adversely affects value. Consider in the previous example of the new home in adherence to current market preference. If this home was located around older homes with obsolete floor plans (i.e. my old neighborhood), then its value would be LESS than if it were surrounded by homes of the same style.

The principle of supply and demand: Most people understand that a high demand and low supply cause an increase in value. A new property probably corresponds to current market tastes and needs. Because new properties are generally in demand, and assuming no fundamental design flaw, you can conclude that for a period of time, the property's value will continue to increase. This defines the growth period. Eventually stability will then settle over the neighborhood. It will be a long time, if ever, before decline comes to this area.

Demand and scarcity are not unlike supply and demand on a local level. If there are only three houses of a popular style in a neighborhood, then those three homes are each worth more than if there were 30 homes of that style. Generally, a home is a useful commodity, however, a poor design or the presence of obsolete features lowers the value of property.

High Point was built with a lot of variety. Every home I have been in (and that's been *a lot*) was smartly designed, and all of the homes in High Point also bear the Built Green environmental certification, further increasing the value of the homes within these blocks. Every home is 2006 or newer. Not every home is unique, altho there is a limited amount of each kind of home here. There were 5 different development companies that built market rate homes in this community.

For all intents and purposes, governing real estate principles indicate High Point homes are a really good investment. I know I am glad I made the move.

There are some new homes still for sale, and there are even some resales now on the market. There is a studio with a really nice view of downtown, a carriage house with a loft, a rare 2x2.5 townhouse with 2-car tandem garage, and several 3+ bedroom townhomes or detached homes available. All are Built Green certified homes. As most everywhere, supply is out of balance with demand at the moment, so some homes have been on the market longer than others. Most are competitively priced, some have experienced realistic price reductions, and one short sale townhome was an aberration and should not be considered as an indication of which direction home values in this community are headed (it went pending in 4 days and someone is getting a really amazing deal).

My home recently appraised at an 8.86% increase over what I paid for it in less than a year. The tax assessments are nicely below current market values so you don't feel like the government is putting the screws to you. It's a great community with lots of diversity and we have great friends and good volunteer opportunities within steps of our front door."