Why You Should Buy the Cheapest Home on the Best Block

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Reposted from Redfin.com.

I bet you think buying an affordable city home requires a sacrifice: the neighborhood will have a low Walk Score and the highly rated schools will be out of reach.

Not necessarily. Some affordable homes are in city neighborhoods near highly rated schools and within walking distance to everyday amenities. But there’s a catch. To find them, you’ll need to search in neighborhoods that have plenty of expensive homes in them, too.

Here’s why: neighborhoods with a mix of home prices are three times more likely to be walkable and have highly rated schools than are purely affordable neighborhoods.

Even when compared with purely high-end neighborhoods, home to the highest-rated schools, neighborhoods with a mix of home prices are the most likely to have it all: a high Walk Score and schools with above-average ratings.

Median Walk Score, GreatSchools Ranking for Different Types of Neighborhoods

Neighborhood Home Price Mix Median Neighborhood Walk Score Median Neighborhood GreatSchools Rating
Affordable 54 4.1
Balanced-Mix 70 5.1
High-End 57 6.9

The problem is that areas with a balanced mix of home prices cover just 13 percent of major U.S. cities. We looked at the 20 most populous cities Redfin serves and identified these neighborhoods in the fall because communities with a wide range of incomes, and by association, home prices, give families a better shot at getting ahead.

But are these actually the kinds of places where most people would want to live? After affordability, homebuyers’ top two demands are good schools and walkability. So we ranked the 170 balanced-mix and affordable neighborhoods by their Walk Scores and GreatSchools school ratings and found that only 24, or 14 percent, actually meet those common demands. Here they are:

Top 24 Affordable and Balanced Mix Neighborhoods Ranked by Walk Score and GreatSchools Score

Rank Neighborhood Home Price Mix Walk Score Neighborhood GreatSchools Rating
1 University District, Seattle Balanced 91 7.8
2 West End, Washington, DC Balanced 95 6.5
3 Adams Morgan / Kalorama Heights / Lanier Heights, Washington, DC Balanced 94 6.5
4 Queen Anne, Seattle Balanced 80 7.4
5 Ravenna, Seattle Balanced 74 7.7
6 Rosedale, Austin Balanced 69 8.1
7 International District, Seattle Affordable 97 5.2
8 Columbia Heights, Washington, DC Balanced 93 5.5
9 Fulton River District, Chicago Balanced 92 5.2
10 Hillcrest, San Diego Balanced 80 6.3
11 Banker’s Hill San Diego Balanced 84 5.8
12 Zilker, Austin Balanced 64 7.6
13 Westmoreland / Montrose, Houston Balanced 83 5.6
14 Platt Park, Denver Balanced 75 6.3
15 Eastlake, Seattle Balanced 69 6.8
16 Windsor Square, Phoenix Balanced 74 6.2
17 Victory Heights, Seattle Affordable 64 7.0
18 Rolando / SDSU, San Diego Affordable 74 5.9
19 Columbia City, Seattle Affordable 80 5.2
20 Bouldin Creek, Austin Balanced 75 5.4
21 West Highland, Denver Balanced 74 5.1
22 Highland, Austin Affordable 63 6.1
23 El Cerrito, San Diego Affordable 65 5.8
24 Schorsch Village, Chicago Affordable 68 5.2

Only eight of the original 20 cities from our last report have a neighborhood on the list. Not a single neighborhood in Boston made the cut, even though Boston topped the list in our last report for having the most area covered by a balanced mix of home prices. These neighborhoods are walkable, but the schools have below-average ratings.

So, what’s going on here? There just aren’t enough of these kinds of neighborhoods for everyone who’s looking for an affordable home. It’s one reason we’re asking policymakers to loosen restrictions on building in Seattle and other cities so that more integrated housing can be developed and more people can live in these types of neighborhoods.

Take Los Angeles, for example.

“Homebuyers have to pay a significant premium to live in a neighborhood with highly rated schools and amenities,” said Redfin agent Nikki Kilmer. “Although there are technically some neighborhoods in L.A. that could be considered affordable, there’s not much demand to live in those areas.”

If you are looking for an affordable home, your instinct might be to search in affordable neighborhoods. But if you also want highly rated schools and a high Walk Score, look for the least-expensive home in one of the mixed-priced neighborhoods on this list. This is a lot like grandpa’s strategy to make a safe real estate investment, “buy the cheapest home on the best block.”

Check out the table below to see how the affordable and mixed-price neighborhoods in your city stack up in terms of walkability and school scores. Click here to download a spreadsheet complete with the Walk Score, average GreatSchools rating and median sale price for each neighborhood analyzed in this report series.

The Top Affordable and Balanced Mix Neighborhoods in 20 Cities by Walk Score and GreatSchools Ranking

Austin Neighborhood Walk Score Neighborhood GreatSchools Rating
Affordable Highland 63 6.1
Balanced Mix Rosedale 69 8.1
Baltimore Neighborhood Walk Score Neighborhood GreatSchools Rating
Affordable Brewer’s Hill 90 1.8
Balanced Mix Otterbein 90 1.7
Boston Neighborhood Walk Score Neighborhood GreatSchools Rating
Affordable Jones Hill /
Uphams Corner
85 3.6
Balanced Mix Hyde
Square
88 3.6
Chicago Neighborhood Walk Score Neighborhood GreatSchools Rating
Affordable Schorsch
Village
68 5.2
Balanced Mix Fulton River District 92 5.5
Columbus Neighborhood Walk Score Neighborhood GreatSchools Rating
Affordable Misty Meadows 48 7.9
Balanced Mix German Village 86 1.9
Denver Neighborhood Walk Score Neighborhood GreatSchools Score
Affordable Cole 75 3
Balanced Mix Platt Park 75 6.3
Detroit Neighborhood Walk Score Neighborhood GreatSchools Rating
Affordable Sherwood Forest 68 4.1
Balanced Mix South
University Village
92 4.4
Houston Neighborhood Walk Score Neighborhood Greatschools Rating
Affordable Sagemont 39 6
Balanced Mix Westmoreland 83 5.6
Indianapolis Neighborhood Walk Score Neighborhood GreatSchools Rating
Affordable Augusta
Heights
42 4.5
Balanced Mix Downtown Indianapolis 76 4.9
Jacksonville Neighborhood Walk Score Neighborhood GreatSchools Rating
Affordable Southwood 36 5.2
Balanced Mix Isle of
Palms
17 6.4
Los Angeles Neighborhood Walk Score Neighborhood GreatSchools Rating
Affordable South Los Angeles 68 4.1
Balanced Mix
Memphis Neighborhood Walk Score Neighborhood GreatSchools Rating
Affordable Binghampton-Lester 55 4
Balanced Mix Central
Gardens
60 4
Philadelphia Neighborhood Walk Score Neighborhood GreatSchools Rating
Affordable Castor Gardens 77 3.7
Balanced Mix Olde City 97 4.6
Phoenix Neighborhood Walk Score Neighborhood GreatSchools Rating
Affordable Estrella Northwest 42 6
Balanced Mix Kierland 52 9.1
San Antonio Neighborhood Walk Score Neighborhood GreatSchools Rating
Affordable Timber Ridge 39 5.4
Balanced Mix Alamo Plaza 79 4.7
San Diego Neighborhood Walk Score Neighborhood GreatSchools Rating
Affordable Rolando 74 5.9
Balanced Mix Hillcrest 80 6.3
San Francisco Neighborhood Walk Score Neighborhood GreatSchools Rating
Affordable Hunters Point 43 5.4
Balanced Mix Visitacion
Valley
62 5.2
San Jose Neighborhood Walk Score Neighborhood GreatSchools Rating
Affordable Downtown 82 4.2
Balanced Mix
Seattle Neighborhood Walk Score Neighborhood GreatSchools Rating
Affordable International District 97 5.2
Balanced Mix University District 91 7.8
Washington, D.C. Neighborhood Walk Score Neighborhood GreatSchools Rating
Affordable Lamond-Riggs 70 4.4
Balanced Mix West End 95 6.5

Method and Data
We used home sale price data from Redfin from July 2013 through June 2015. City-specific median family income came from the 2014 one-year American Community Survey.

To define affordability in each city, we kept it simple: A home was considered affordable if 28 percent of the local median family income could cover the monthly mortgage and principal payment, assuming the buyer put 20 percent down and took out a 30-year loan with a four percent interest rate. Homes with sale prices 20 percent above that threshold were considered expensive.

To get the price mix of different areas, we summarized the price of recently sold homes in a 500-meter grid. Affordable areas had at least three affordable homes for every expensive home. Areas with a balanced mix of home prices had a ratio of affordable to expensive homes between 0.33 and 3.0. High-end areas had at least three expensive homes for every affordable home.

We considered a neighborhood “walkable” if it had a Walk Score of 60 or higher. Read more about the Walk Score methodology here. An above average GreatSchools score meant 5 or above. Read more about the GreatSchools methodology here.

 

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