Violent crime effects home values

Last week’s alleged horrific and violent crime has propelled our Montgomery County MD community, specifically Rockville, into the national spotlight.  And like other communities that have experienced violent crimes, residents will be asking questions long after the spotlight dims.  Unfortunately, the aftermath of violent crimes not only leaves a psychological scar on the community, it also affects home values.

Of course, it’s intuitive to think that home values are affected by violent crime.  You might ask, how can such a violent act that occurred last week not be in the minds of prospective home buyers?  And as you will see in the research below, violent crime will also compel some home owners to move.

A 2009 study by John Hipp, George Tita and Robert Greenbaum sought to determine the interrelationship between crime and “residential mobility” (Drive-Bys and Trade-Ups: Examining the Directionality of the Crime and Residential Instability Relationship; Social Forces; 2009, Vol. 87, No. 4, pp.1777-1812).  The findings revealed that although there is no evidence that a year with a high number of home sales increases violent crimes, they found direct evidence that a year with a high number of violent crimes will increase home sales during the ensuing year.  The same holds true for property crimes, where a high number of home sales do not lead to increased property crimes, however a high number of property crimes will increase the number of home sales the following year.  They also found evidence of a downward trend in home values following a year of high violent crime.  The authors of the study concluded that households basically respond to crime by moving.  Additionally, many home buyers not only take crime stats into account, but likely consider recent high profile crimes when deciding on a home.

They also found evidence of a downward trend in home values following a year of high violent crime.

There are decades of research on the effects of violent crime on property values.  For example, an influential article by Sheila Little published in 1988 discussed an appraiser’s duty to consider violent crime when determining property value (Effects of Violent Crimes on Residential Property Values; Appraisal Journal; 1988, Vol. 56,No. 3, p341-343).  She stated; “It is part of appraisers’ responsibilities to make an effort to ascertain the effects of violent crimes on market value of properties.”

Fortunately, communities heal.  However, it’s not easy and certainly not immediate; as evidenced by the research of George Galster, Jackie Cutsingerm and Up Lim.  They studied how five US cities responded to “exogenous shock,” such as violent crime (Are Neighbourhoods Self-stabilising? Exploring Endogenous Dynamics; Urban Studies; 2007, Vol 44, No.1, pp. 167-185).  They concluded that communities have a “self-regulating adjustment” mechanism that help them adjust and stabilize after various external shocks.  Although an increase in violent and property crime will elicit a community’s self-regulation mechanism; stabilization takes “considerably longer” than other external shocks, especially when the shock to the community is substantial.

Galster, Cutsingerm, and Lim rhetorically ask how the self-correcting mechanism functions; how does it adjust and stabilize a communityThey propose that there are social, economic, and/or political reactions to shocks such as violent crime.  They surmise these reactions are manifested as a “powerful momentum” within communities.

Our community’s self-regulating mechanism has already been deployed, as demonstrated by the intense parent and community involvement in Rockville, asking questions and seeking change.  And you can expect a “powerful momentum,” as described above, for change.  The resulting social, economic, and/or political change will limit the effects of such violent crimes on home values, and demonstrates why Montgomery County MD continues to be the residence of choice for many home buyers.

By Dan Krell
Copyright © 2017

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.