Homebuyers have various criteria when searching for a home. Some are most concerned with schools, while others may be interested in proximity to mass transit. However, one of the top items homebuyers consider when buying a home is neighborhood safety.
Homebuyers do not have to justify their preference for a safe neighborhood. However, concern for neighborhood safety goes beyond protecting their families, it is also a consideration to protect the financial investment in their homes. A rich body of research validates homeowners and buyers concern for neighborhood safety by documenting correlations of crime and home values.
An early influential study by Sheila Little from 1988 highlighted the effect of crime on property values (Effects of Violent Crimes on Residential Property Values; Appraisal Journal; 1988, Vol. 56 No. 3, p. 341-343). Little discussed an appraiser’s duty to consider violent crime when determining property value. Because property disclosure 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 by Allen K. Lynch and David W. Rasmussen (Measuring the impact of crime on house prices; Applied Economics, 2001, 33, p1981-1989) found that when weighted over a large metro area, crime per-se does not 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 homeowners 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 are buying a home, it is 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 is also a good idea to talk to your potential neighbors. You can also view additional metro crime data compiled by the FBI (fbi.gov).
Dan Krell is a Realtor® with RE/MAX Platinum Realty in Bethesda, MD. You can access more information at www.DanKrell.com.