Featured Research

from universities, journals, and other organizations

Shabby, urban neighborhoods wisest choice for investors

Date:
May 1, 2014
Source:
University of Chicago Booth School of Business
Summary:
Researchers find that investing in real estate located in run-down, urban neighborhoods that border tony areas is wise choice. The most promising urban real estate can be found in run-down neighborhoods that border tony, upper-class areas.

For centuries, real estate has been viewed as a smart route to amassing wealth. In today's slowly-improving real estate market, savvy investors are looking for the best place to park their money in preparation for the next boom. According to University of Chicago Booth School of Business Professors Veronica Guerrieri and Erik Hurst, the most promising urban real estate can be found in run-down neighborhoods that border tony, upper-class areas.

Related Articles


In their study, "Endogenous Gentrification and Housing Prices Dynamics," published last year in the Journal of Public Economics, Guerrieri and Hurst, along with Daniel Hartley of the Federal Reserve Bank of Cleveland, explain that when they began their research, they assumed that during an economic boom the fanciest, most desirable neighborhoods would have the largest gains in prices. But after examining data gathered from 29 metropolitan areas, the team was surprised to see that relatively low-priced houses sometimes appreciated more quickly than those in expensive neighborhoods.

"We found that even as far back as the 1980s, poor neighborhoods that bordered upper-class neighborhoods had house prices that appreciated by seven percent more than other poor neighborhoods that were farther away from rich neighborhoods," Guerrieri explained. "These improved neighborhoods also experienced a more dramatic rise in income and education than other poor neighborhoods."

From 2000 to 2006 in Harlem, for example, the researchers discovered that homes in initially low-priced neighborhoods appreciated at nearly twice the rate of homes in more expensive neighborhoods, such as the neighboring Upper West Side. Similarly, while prices rose quickly in the high-class Chicago neighborhood of Lincoln Park in the same period, they did not rise as much as the prices in nearby Wicker Park, a former haven for impoverished artists.

Because the steep price increases in these neighborhoods initially surprised the researchers, they dug deeper to find the reasons why. They conclude that as housing demand increases, people who are doing well want to live in places with low crime rates, safe public transportation and good public schools -- amenities that come with rich neighborhoods. But while many cannot afford these high-end neighborhoods, they can afford nearby areas that share some of these benefits. As these new residents move into nearby blocks, housing prices begin to go up, dilapidated houses and buildings are transformed or torn down, and the neighborhood becomes more affluent.

"It is clear now that the larger the housing boom, the more homes in poor neighborhoods appreciated relative to rich neighborhoods," Hurst said. "We found one interesting gentrification pattern but this data can provide other patterns that are worth studying."


Story Source:

The above story is based on materials provided by University of Chicago Booth School of Business. Note: Materials may be edited for content and length.


Journal Reference:

  1. Veronica Guerrieri, Daniel Hartley, Erik Hurst. Endogenous gentrification and housing price dynamics. Journal of Public Economics, 2013; 100: 45 DOI: 10.1016/j.jpubeco.2013.02.001

Cite This Page:

University of Chicago Booth School of Business. "Shabby, urban neighborhoods wisest choice for investors." ScienceDaily. ScienceDaily, 1 May 2014. <www.sciencedaily.com/releases/2014/05/140501132526.htm>.
University of Chicago Booth School of Business. (2014, May 1). Shabby, urban neighborhoods wisest choice for investors. ScienceDaily. Retrieved October 24, 2014 from www.sciencedaily.com/releases/2014/05/140501132526.htm
University of Chicago Booth School of Business. "Shabby, urban neighborhoods wisest choice for investors." ScienceDaily. www.sciencedaily.com/releases/2014/05/140501132526.htm (accessed October 24, 2014).

Share This



More Science & Society News

Friday, October 24, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Ebola Protective Suits Being Made in China

Ebola Protective Suits Being Made in China

AFP (Oct. 24, 2014) A factory in China is busy making Ebola protective suits for healthcare workers and others fighting the spread of the virus. Duration: 00:38 Video provided by AFP
Powered by NewsLook.com
WHO: Millions of Ebola Vaccine Doses by 2015

WHO: Millions of Ebola Vaccine Doses by 2015

AP (Oct. 24, 2014) The World Health Organization said on Friday that millions of doses of two experimental Ebola vaccines could be ready for use in 2015 and five more experimental vaccines would start being tested in March. (Oct. 24) Video provided by AP
Powered by NewsLook.com
Microsoft Riding High On Strong Surface, Cloud Performance

Microsoft Riding High On Strong Surface, Cloud Performance

Newsy (Oct. 24, 2014) Microsoft's Q3 earnings showed its tablets and cloud services are really hitting their stride. Video provided by Newsy
Powered by NewsLook.com
EU Gets Climate Deal, UK PM Gets Knock

EU Gets Climate Deal, UK PM Gets Knock

Reuters - Business Video Online (Oct. 24, 2014) EU leaders achieve a show of unity by striking a compromise deal on carbon emissions. But David Cameron's bid to push back EU budget contributions gets a slap in the face as the European Commission demands an extra 2bn euros. David Pollard reports. Video provided by Reuters
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:

Strange & Offbeat Stories


Science & Society

Business & Industry

Education & Learning

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins