The housing market is making a comeback. Hard to miss after seven straight years of grinding losses.
Perhaps you have noticed a pattern. Certain areas come back first, and often don’t lose as much value as other areas. The answer is often in the land itself. The first settled and built areas were first settled and built for a reason: the land was good. Fertile, with good drainage and near transportation routes, all things a 17th century farmer would notice. Great views came later, but keep in mind that water was also a source of food, transportation and commerce. Think about the wealthiest suburban towns you know. They almost always have a solid agrarian tradition, although it may be difficult to recognize when they are dressed up in their fancy 21st Century clothes.
Cities are different. Cities were most often established at transportation hubs, usually in protected harbors with access to navigable waterways, but sometimes at the intersection of important roads. Cities grew as new industries were established (automobiles, steel and oil come to mind), and declined as these industries succumbed to the creative destruction of capitalism. Political forces, crime and cronyism often hasten the demise. Some cities recover; some do not. Even Ricky and Lucy eventually moved to Connecticut.
So what are the characteristics of these former farming communities? Wealth accumulated there. Basic infrastructure was built early on, so the cost of expansion and modernization has long been absorbed. Schools tend to be well-established and high quality, often mimicking the qualities of private schools. The long-established aspect of these municipalities becomes an important part of their success: costs and taxes are kept down, which makes these areas even more attractive.
Between 1995 and 1998 I was the tax assessor in Rumson, a wealthy bedroom community in northeastern Monmouth County and a short ferry hop to Wall Street. As many of you will recall, the real estate market collapsed around 1991, precipitated by a stock market crash in 1987. Part of my job was to review sales to determine whether the sales were “usable” for assessing purposes, but what I saw surprised me. By 1995 sales in Rumson were higher than the peak of the market in the late 1980’s. Other parts of Monmouth County took six more years to fully recover.
The moral of the story? If you are choosing a place to live, the old saying remains true: it is often a better investment to live in the smallest house in an established community than the in the largest house in a newer community.
– Bob Gagliano
Like This Post? Share It!