More Reasons to Stay Away from Starter Home Areas

Buyers I’ve helped buy property in Austin have heard my real estate mantra – stay away from starter home areas. I don’t like starter home neighborhoods. I don’t own property in starter home areas and I never will. I advise buyers to be very, very careful if considering a home in such an area.

I like established neighborhoods where you see what you’re buying. You see the traffic flow, the neighborhood, the surrounding commercial development, etc. In newer, fast developing areas, it’s impossible to know for sure how the neighborhood will turn out, what the traffic will be like, whether the builder will complete the neighborhood as proposed, whether investors (and thus renters) will be allowed in at a greater percentage that is healthy, etc.

I came across this story which illustrates my point well. Here are some excepts.

At Windy Ridge, a recently built starter-home development seven miles northwest of Charlotte, North Carolina, 81 of the community’s 132 small, vinyl-sided houses were in foreclosure as of late last year. Vandals have kicked in doors and stripped the copper wire from vacant houses; drug users and homeless people have furtively moved in. In December, after a stray bullet blasted through her son’s bedroom and into her own, Laurie Talbot, who’d moved to Windy Ridge from New York in 2005, told The Charlotte Observer, “I thought I’d bought a home in Pleasantville. I never imagined in my wildest dreams that stuff like this would happen.”


I don’t know of anything to this degree happening in Austin, but I bet they never thought it would happen in Charlotte either.

And it’s not just “starter homes” that you have to be careful with. Any neighborhood that is new and located away from the heart of the metro area can present risk.

In the Franklin Reserve neighborhood of Elk Grove, California, south of Sacramento, the houses are nicer than those at Windy Ridge—many once sold for well over $500,000—but the phenomenon is the same. At the height of the boom, 10,000 new homes were built there in just four years. Now many are empty; renters of dubious character occupy others. Graffiti, broken windows, and other markers of decay have multiplied. Susan McDonald, president of the local residents’ association and an executive at a local bank, told the Associated Press, “There’s been gang activity. Things have really been changing, the last few years.”

The article goes on to claim that we may see many of the “McMansion” suburban neighborhoods with big lots lose popularity in coming decades as the trend turns back toward urban living closer to the city.

Arthur C. Nelson, director of the Metropolitan Institute at Virginia Tech, has looked carefully at trends in American demographics, construction, house prices, and consumer preferences. In 2006, using recent consumer research, housing supply data, and population growth rates, he modeled future demand for various types of housing. The results were bracing: Nelson forecasts a likely surplus of 22 million large-lot homes (houses built on a sixth of an acre or more) by 2025—that’s roughly 40 percent of the large-lot homes in existence today.

So, I’m sticking with the advice I always give buyers and investors. Stay as close in to Austin as you can afford and be very careful about buying in newer areas that have yet to be built out. Your builder will head for the hills at the first sign of trouble and leave your subdivision uncompleted, perhaps even without the pool and other amenities you were promised.

Posted by Steve
8 years ago
Steve

Steve is a Real Estate Blogger, Husband and Dad, UT Austin Grad, Runner, Real Estate Broker and owner of Crossland Team and Crossland Real Estate in Austin TX.

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Barry - 8 years ago

East 290 is the new slum for Austin. The housing developments between 183 and Elgin are going to look horrible in just a few years. The presidential meadows places makes me sick when I drive by it. I’ve also seen areas around Hutto that look like they will suffer a similar fate.

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Debbie M - 8 years ago

Frankly, things can change anywhere. I live just north of the old airport in a neighborhood built in the 1950s. Since I’ve moved in , the following things within a mile or two of my house have changed in the past 12 years:

1) The airport moved. Then nothing happened for years. Then the city sold it for negative money. Now there are some big box stores, some restaurants, and hiking trail, and a hospital. One day there is supposed to be some housing, some soccer fields, a big water tower, and who knows what else.

2) Both entrance ramps to I-35, one exit ramp, and part of Cameron Road were destroyed. A “jughandle” replaced the missing section of Cameron; nothing replaced the ramps.

3) Wards turned into Target, Grandy’s turned into a mattress place, and many other stores turned into other stores. Two Hispanic markets, a taco cart, and a lovely roasted chicken cart have opened nearby.

4) Drug deals declined.

5) Pay phones have disappeared.

6) An apartment complex changed from a regular one to a low-income one; thus there was less demand for the local UT shuttle bus, so now it runs about half as often as it used to. The city buses quit running through downtown and started making U-turns in downtown instead. All city buses added 5 minutes to the route between my house and downtown as they meander through the old airport. All city buses cost twice as much as they once did.

7) The library moved slightly farther away but into a bigger and more beautiful space.

8) The original owners of the houses are dying off or moving away. Some of the houses are now being used as starter homes by young Hispanic families; some are being used as permanent homes for gay couples. The houses are relatively small, but have big yards, so lots of people have pets.

9) The nearest apartment complex is being renovated. I no longer have a roach problem.

Some of these changes are great, some of them stink, some of them make no difference to me, but my neighborhood seems quite different than it used to, and it was about as entrenched a neighborhood as I could imagine.

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Steve - 8 years ago

Hi Barry – yes, some of those developments are the type where it’s just not certain how they will hold up the first 5-10 years. When the market slows, as it has in Austin for starter homes, that’s when it can get iffy.

Debbie – Very good points. Even established areas go through further change over time. In the case of your area (MLS Area 3) north of the old airport, the changes are positive and the home values have increased as a result.

All areas go through the “Neighborhood Life Cycle”. One of those stages is “decline”, which unfortunately sets in almost immediately in some of the cheap, starter home areas. Your area is going through “Revitalization” whereby it’s being rediscovered and people are investing in the area, fixing up the homes, and bringing fresh life to the neighborhoods.

You’ve given me the idea of writing a separate blog article about the neighborhood life cycle and how it plays out.

Steve

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Debbie M - 8 years ago

Yea! A new article idea!

Hmm, revitalization sounds all good and nice, except that somehow transportation (by car, bus, and plane) has gotten much worse. (I think transportation by bicycle is about to get better, though.) We still sure have a lot of poor-neighborhood businesses, too, like loads of payday loan companies, a pawn shop, and a liquor store.

I wonder how you can try to guess what’s going to happen next. Is there a way to see who’s trying to change zoning rules? I know you can look up crime stats by zip code as well as flood plains and other geological features. Yes, I’m looking forward to your future life cycle article.

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William Bay - 8 years ago

Debbie,
I too live in Windsor Park. I think the changes that are taking place are absolutely phenomenal. I know the whole screw up with North bound offramp is ridiculous, and big boxes aren’t really my thing. But look at all the improvement that is happening in our area, I love driving down my street everyday and looking at these mid-century modern track homes. And like my neighbor and good friend, gay people give such good facelifts and care to their houses.

And yes, there has been talks about design guidelines going into effect for Cameron, Berkman and Briarwood (the business section) it would be similar to the high density/mixed use requirements of the commercial design guidelines.
I have a feeling it will turn the whole area into something where you could walk to a local restaurant, bakery or cafe. This of course would take a few years, but I see a true cosmopolitan neighborhood feel to the Windsor Park area in the future.

Cheers!
William

Oh.. that liquor store is great! They are very friendly and very knowledgeable. I recommend them, even for wine.

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Steve - 8 years ago

I think the Berkman/Cameron area will continue it’s revitalization in the coming decade. I agree, they really screwed up that northbound offramp, forcing all the traffic through the new development.

By the way, back in the mid-1980s, I managed the Dominos Pizza on Berkman and I lived for a year right off Sweeney and Manor. It was a very rough neighborhood for sure, but I was young and single and I think I paid about $150/mo. for a garage apartment. One could live very cheap in Austin in the 1980s. We had a huge list of “no delivery” addresses of dangerous apartments along Manor Rd. and elsewhere, and some areas we had to send two drivers in the car for safety reasons. We gave free pizza to any policeman who would stop in for pickup, and they did. It helped us keep them aware of our rough spots and they would in turn let us know where they were seeing trouble.

That was 20+ years ago. Sometimes it takes that long for an area to work through the cycle. But as Austin grows, the location becomes much more valued. My favorite area is between Berkman and Cameron north of 51st and up past briarcliff almost to 290. That’s a great stretch of nice MCM homes isn’t it?

Steve

Steve

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Debbie M - 8 years ago

William, glad you’re liking the neighborhood. I do understand that the liquor store is a good one, but I don’t like alcohol, so it’s not exciting to me. I do recommend the roasted chicken place in the gas station just north of there. And I really like La Palapa (Tex-Mex) and Target.

Mid-century modern. Y’all are so cute. Another term I’ve heard is cracker box! All my friends have houses that are twice as big! However, I do like that my house is very well laid out and solidly built.

I do love, love, love the trend toward high density mixed use.

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