Heavily impacted neighborhoods vs stable neighborhoods

Asked by Nealer, 95630 Mon Jan 21, 2013

Do the hardest hit areas during the depression make the best or worst investments now? I have seen people offering different advice/strategies on the subject. Here are the arguments i've seen:

1) Areas with the largest depreciation during the downturn (>50%) are now the best deals, since have the highest potential to go back up!

2) Areas which held their value more, did so because they had high demand due to good neighborhoods/schools, and therefore these areas will continue to do well as the market rebounds.

The second argument seems to imply that these harder hit areas never truly deserved their "high" prices that they held, which is why they came down so far. In this case, we shouldn't expect them to get back to those levels as fast as the good areas.

Are these arguments overly simplified, or is there truth to either of them? I'm a first time home buyer looking for an investment property.

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Eddie Martini, Agent, Auburn, WA
Fri Mar 29, 2013
you are right on both IMO. The areas that had the highest GROWTH RATES where also followed by new schools, shopping ect ect. With these highly developed "GROWTH" areas you had more VOLUME of homes sold at the PEAK. Those had the largest decline in value.
Previously developed areas that where already established and stable still had value loss but it was a slower decline due to the fact that those homes where not as underwater as most of the newer developed areas and those did not have as much pressure to Short Sale or let their homes go to Foreclosure.
Good news is Sacramento and Placer County areas are on the rise and combined with low interest rates we may have some good news for our local economy coming back together!
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Ed Favinger, Agent, Folsom, CA
Mon Jan 21, 2013

I think you'd be much better off with the 2nd argument... My reasons are that if you are in a stable neighborhood, no what the market condition is, you'll be better off.

If they market is hot, they prices go up along with the rental rates. If the market is slow and you are in a stable area with great amenities, schools etc..? folks looking to buy or rent will be looking to get the best value in the best neighborhoods because an area that is say "not as stable" will show the wear and tear.

The more "pride of ownership" there is in a neighborhood, the higher the value.

I hope this helps...

Make it a great day....
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Kylee Roe, Agent, Sacramento, CA
Mon Jan 21, 2013
I like the second argument! And #2 is also true, based on schools, quality of life. If you're a first time home buyer, why buy investment property? Wouldn't you want to buy a home to live in?

Your best investment is whatever matches your strategy. Do you want to buy, hold and earn equity for later resale? Or do you want to buy in a great but more expensive area and have less trouble renting out the home? Do you strictly want cash flow regardless of area? Many questions to ponder!

Good luck!
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