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.