Home buyers have various criteria when searching for a home. Some are concerned with schools, while others may be interested in a house’s proximity to mass transit. However, one of the top items home buyers consider when buying a home is neighborhood safety. Which begs the question, Is there a correlation between home prices and safety?
Home buyers don’t have to justify their preference for a safe neighborhood. However, concern for neighborhood safety go beyond protecting their families, it is also a consideration to protect the financial investment in their homes. And a rich body of research validates home owners and buyers concern for neighborhood safety by documenting correlations of crime and home values.
Research about home prices and safety
An early influential study connecting home prices and safety was conducted by Sheila Little in 1988, which investigated the effect of crime on property values (Effects of Violent Crimes on Residential Property Values; Appraisal Journal; 1988, Vol. 56 No. 3, p341-343). Little discussed an appraiser’s duty to consider violent crime when determining property value. Because property disclosure has is onerous, material facts such as violent crime must be considered in the valuation process. She stated; “It is part of appraisers’ responsibilities to make an effort to ascertain the effects of violent crimes on market value of properties.”
Another study looking at home prices and safety was published by Allen K. Lynch and David W. Rasmussen (Measuring the impact of crime on house prices; Applied Economics, 2001, 33, p1981-1989). They found that when weighted over a large metro area, crime per-se doesn’t have a significant impact on the average metro home sale price. However, they did find that “house values decline dramatically in high crime areas.” Besides being identified through statistical means, high crime areas may also be perceived as such because of relative juxtaposing of neighborhoods. The authors suggest that localities can reduce loss of tax base by “reducing the probability of neighborhoods crossing the high crime threshold.”
A 2010 study by Keith Ihlanfeldt &Tom Mayock looked at seven types of crime and the effects on home prices (Panel data estimates of the effects of different types of crime on housing prices; Regional Science and Urban Economics, 40; 2–3, May 2010, p 161-172). They concluded that robbery and aggravated assault had “meaningful influence” on property values.
A 2009 study concluded that home owners respond to crime by moving (Hipp, Tita & Greenbaum; 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). Besides discovering that violent crime significantly increases home sales the following year, the authors also found evidence of a downward trend of home sale prices for the same time period.
Not all home owners decide to move, as remaining residents can stabilize their neighborhood. Galster, Cutsinger, and Lim concluded that communities are self-regulating and can adjust over a long period of time (Are Neighbourhoods Self-stabilising? Exploring Endogenous Dynamics; Urban Studies; 2007, Vol 44, No.1, pp. 167-185). Stabilization takes “considerably longer” if the shock to the community is substantial. They concluded there are social, economic, and/or political reactions to neighborhood crime.
If you’re buying a home, it’s unlikely that your real estate agent will provide answers about neighborhood safety (because it may be construed as steering and a violation of fair housing laws). However, you should contact the local police precinct and ask questions to make your own determination of neighborhood safety. It’s also a good idea to talk to your potential neighbors. You can also view additional metro crime data compiled by the FBI (fbi.gov).
Original article is published at https://dankrell.com/blog/2019/12/10/home-prices-and-safety/
By Dan Krell
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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.