Real Estate: How Much Does Neighborhood Matter?

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Of late, I have been shifting my professional concentration into specializing in prewar architecture – which in South Florida means pre-World War Two, not pre-Revolutionary War. There are some prewar homes here in Broward, although not as many as you would find in Miami-Dade and Palm Beach Counties.



I was curious to see (roughly) how much people were willing to pay to buy prewar homes in different neighborhoods, holding all other factors constant. Interestingly I found that buyers were willing to pay substantial premiums for the privilege of living in prewar homes in the Victoria Park, Colee Hammock, and Rio Vista neighborhoods of Fort Lauderdale, compared with Tarpon River, the original settlement area of Hollywood, and even Miami Shores.

This type of analysis can be extended into the Island City. I have written before and at length on the severe allergic reaction I have to the valuation measure my colleagues in Realtor Land utilize, i.e., price per square foot. I do think if you’re going to use one measure only, that’s the best one to use. However, I don’t think it is very useful when drilling down further or making comparisons.

The majority of single family homes in WilMa were built in the 1950s – 73 percent according to the Property Appraiser record. Thus you could (theoretically; or I suppose in actuality if you had the resources) lift up a home in the northwest corner of Wilton Manors, plop it down in the southeast corner… and it would be the same as nearly all the homes around it. Thus any differential in aggregate value, when fully teased apart, has to do with the implicit “cost of entry” to the neighborhood.

The attached map spells out the differences I found. I divided WilMa into the three neighborhood associations the city has established. Then I added a horizontal divider right down 26th Street to evaluate six separate areas.

With the far northwest corner as baseline, I analytically estimated how much premium a buyer would be willing to pay in the other five sections of the city – holding everything else constant (e.g., square footage of home, lot size, pool or no pool, waterfront or no waterfront).

Relative to the northwest corner, buyers are willing to pay more to live in all the other areas of the city – with premiums ranging from $50,000 in the southwest corner to $150,000 in the southeast corner. The premium in Center Wilton and the northeast corner is the same.

Or, to paraphrase Julius Caesar, in considering WilMa valuations, “Wilton Manors est omnis divisa in partes quattuor.”

Hopefully this information will be of value to those seeking to relocate into the Island City, as well as to those estimating and reflecting upon pricing strategies here.

 

James Oaksun, Florida's Real Estate Geek(SM), is Broker-Owner of New Realty Concepts in Oakland Park. In addition to having degrees from Dartmouth and Cornell, he is a Graduate of the Realtor Institute (GRI).


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