There are lots of factors that play into the real estate value of a home, and ultimately, how much you can look forward to spend on a mortgage loan. Climate, demographics, local economy, jobs, and access to good schools are just some of the things dictating how much (or how little) you’ll pay to move into a new house.
Without a doubt, crime and safety are two of the biggest reasons determining housing markets‘ values. If you’ve checked out Trulia’s “heat map,” you’ll have noticed that entire sections of any given city are notorious for their crime rates and subsequently, their low property values. The unfortunate truth is that unsafe neighborhoods drive away prospective residents and cause home values to sink for their undesirability.
There’s a lot of speculation that the impact of terrorism and major criminal events negatively impact real estate markets. These properties with a troubled past are called “stigmatized properties.” According to Ross Kenneth Urken of The Street, citing real estate expert Randall Bell, “a typical stigmatized property, (Bell) says, will sell 15 to 20% below market value and stay on the market three months to a year longer than normal.”
Impact of Terrorism on Housing Markets
The impact of crime and terrorist tragedies carry impacts to the area they take place: New York City with 9/11, Boston in the recent Marathon bombing. Some may have a greater effect than others on local real estate.
1. The Boston Bombing. The Boston Marathon bombing earlier this year may indirectly affect the future of the city’s housing market, albeit temporarily. According to the official Boston website, the city draws over 22 million visitors a year, drawing in $8.6 billion in revenue. The local economy thrives on its tourism — plus, the annual marathon brings in over $140 million. Considering that the bombing was an isolated incident, and that recovery from the tragedy has been strong, it’s not likely that there will be long-term problems posed to the Boston housing market, even though foot traffic in the city’s downtown core dropped off significantly in the weeks following the attack.
But, says Daniel Torelli, writing for real estate blog RealtyPin, the bombing could start a passive problem. “While the housing market may not be affected too severely by the bombings,” he said, “the general economy of Boston might suffer, and that could indirectly hurt the real estate industry.”
Michael Sivy of Time magazine added, “Unless the Boston Marathon bombing is part of a much larger plot, it seems unlikely that their impact on the markets and economy will last more than another day.”
2. The September 11, 2001 attacks. “One of the things that made 9/11 so serious was that it disrupted financial activity in New York City, including the stock market,” said Sivy. “Indeed, the markets were closed for four trading days, the longest shutdown since 1933. A number of other banks and brokerages were brought to a halt as well, which magnified the effects further.”
Like the Boston bombing, the effects of terrorism from the 9/11 attacks affected one part of the economy, which can trickle down to other areas. The hit to the financial hub of Manhattan, as well as the trauma of the incident, led many people to move away from the city and look for work — and a new life — elsewhere.
3. The Ariel Castro kidnappings. Ariel Castro kept three women hostage in his suburban Cleveland, OH house for an entire decade — and apparently, nobody saw a thing. It’s not until his victims managed to escape and summon authorities that Castro’s home has become the example of what a stigmatized property is. The unremarkable house at 2207 Seymour Avenue has now become something of a morbid tourist attraction, says AOL Real Estate.
“The property already appears to have joined many other homes that have been stigmatized by notorious crimes — the Akron, Ohio, childhood home of serial killer Jeffrey Dahmer, for example, or the Houston home where Andrea Yates drowned her five children,” notes the blog. “Homes such as these have been known to drop sharply in value because of their chilling associations.” (Photo courtesy Slate.com)
Would You Live There?
Despite their drop in value, some people may find the mortgage loan savings of living in a home with a criminal past appealing. “Remarkably, there are people who will live on tainted property,” expert Bell says in Urken’s article. “Usually the discount is an enticement for someone to buy it.”
We all know that sex offender registries exist to notify you of who your potential neighbors could be … and the crimes they’ve committed. Many states also have disclosure laws requiring realtors to tell you if the house you’re interested in buying was the site of some horrific incident. One famous lawsuit came about from it: 1983’s Reed vs. King. Realtors didn’t inform a man that the house he purchased for $76,000 was the scene of a grisly murder.
It depends on the locale, too. According to Bell, urban vs. suburban goes a long way in determining how much of the stigma sticks. “If it’s an urban area, these crime situations have less of an impact than in suburban and rural areas,” Bell said, adding that Castro’s more suburbanized property may not fare well after all since it’s an area that people don’t expect to be a crime risk. “This crime is so outrageous … a potential buyer would be turned off by that history,” he said.
Weigh the Pros and Cons of Stigmatized Housing Markets
If you’re unsure about the neighborhood you’re scouting, or if the house you’re looking at could have been involved with a criminal past, do your research. Check out the Trulia heat map for crime rates. Log on to your local sex offender registry to see who lives there. Deal or no deal, safety (or the discomfort of inheriting a mortgage loan for a stigmatized house) isn’t worth the discount in mortgage payments. Sheree Curry of AOL Real Estate suggests checking city records. And don’t be afraid to ask directly your realtor or seller about the property in question — they’re obligated by law to tell you.
What about areas impacted by large scale terrorist acts? If you’re seeking to move into a city like Boston or New York, consider that you can be one of the people who sheds the city of its temporary stigma. Rallying against the effects of terrorism is a sign of strength — it takes people to revitalize its image by visiting, shopping and living in those areas. By being the change you’ve wanted to see, you’ll be directly responsible for improving an area’s housing market to where it should be … and further.
(Header photo courtesy of Trulia)