One of the things many people care about when searching for a home is what the neighborhood is like. Are people neighborly? Or do the residents generally keep to themselves?
This is really hard to determine without actually living in the area for some time. Most people are left to Google this information on their own, but information like this is sparse. And asking your agent is also a crapshoot and will also be from secondhand, anecdotal sources, unless they live in the area themselves.
It turns out though that there is a data-driven indicator one could use to get a sense as to whether an area is more or less neighborly than others. It’s by looking at the percentage of home purchases in an area made by investors rather than families.
Why? When investors purchase homes, they are often turning them into single family rental units, and an increase in rental units in a neighborhood generally contributes to a decrease in neighborliness and community involvement. Renters are a more transitory population and are less likely to plant long-term roots in the area than someone who is purchasing the home to own and live in it. Neighborhoods where homes are owned by investors also tend to be less stable, experience more crime and have greater property deterioration. Additionally, homes owned and occupied by individual families tend to be better maintained.
To further flesh this out with an example, we took a look at home purchase transactions in the Greater Seattle area for the period of 2015-2019.
Interestingly, the number of investor purchases as a percentage of home purchases has been steadily declining since peaking in 2016, which bodes well for neighborliness generally in the Greater Seattle area.
That said, digging further into the data shows that some neighborhoods have a lot more investor activity than the norm in Greater Seattle. We determined this by looking at the total distribution of investor percentages across all zip codes, and calculating which zip codes have a positive standard deviation from the mean. Below is an excerpt of all of the zip codes that have a positive standard deviation, i.e. zip codes that appear to have more investor activity than typical for the region.
This indicates that the zip codes corresponding to the neighborhoods in the cities above show greater than typical investor activity, and may have declining neighborliness. If the community vibe is something you care a lot about, then taking a look at this kind of data may help you a lot in finding a desirable place to buy a home.
Interested in getting an analysis like this for regions that you are looking to buy a home in? Connect with one of our real estate experts for a personalized analysis for the area you are interested in buying a home.
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