Our society loves history. Especially when there is some control, or perhaps some ‘filter’ is applied, just to make it look a little better.
We teach history to young children, adolescents, teenagers, and college students. We use it as entertainment, propaganda, and even the highest level of our court system looks back in time to help understand the application of current law.
Historic Significance in Real Estate
So what about Real Estate? Does the real-estate world appreciate history?
‘Historically’ speaking, yes (pun intended). But much like society, real-estate likes history so long as it’s narrated and shaped to its advantage. Any blemishes or embarrassing examples of misuse must be replaced or covered up. This requires financial resources, which if done correctly, can pay off as a great investment. When it comes to historical designations in certain subdivisions, the same principles apply. Typically, we consider a ‘historic designation’ as a mark of prestige and value for homes within an applicable neighborhood. We also assume this increases home values instantly, and therefore finding such a neighborhood to either buy or invest is a slam dunk.
Be careful what you wish for.
“Historic neighborhoods can sometimes turn into a lot of work and extra financial burden,” says Justin Davidson, a real estate blogger who has spent time writing about real estate conditions in different markets around the country, including the Phoenix area.
“It’s no secret these designations usually increase property values. So like with anything else, people try to capitalize any way possible.”
In the last 20 years, metropolitan Phoenix has become a national poster child for real estate boom and bust. But no matter the cycle, historic neighborhoods—those designated by the city and national registry—have typically maintained a higher value than that of similar properties in surrounding areas without the designation. Typically, these neighborhoods require a minimum age (50 years in some cases), and a majority of the homes need to maintained to high standards—while keeping original architecture style. Often times, tax benefits are offered for maintenance costs or other contributions are promised by the municipality of the neighborhood. After all, the towns and cities have a stake in helping with the appearance of historic subdivisions.
More Supply, Less Demand
So naturally, more residents in older neighborhoods want in. However, it’s not always Pleasantville in this nostalgic plat of suburbia. Much like regular history, there is confusion, greedy characters, and a good lesson to learn. One issue is an ever-increasing number of residents and HOA groups applying with the town or city for historical designation. Even when carefully considered with strict guidelines, every approval creates more supply, which creates less demand, which we know…decreases value in existing historic neighborhoods.
Once a residential historic district is approved, HOA requirements are normally tightened up and more strictly enforced. This often includes increased expenses. Some people will resent having to buy more expensive windows. Another issue that arises is the prospect of new construction on an empty lot within the neighborhood. Any add-on or even the slightest landscaping change may require approval from the HOA and even nosy, arrogant neighbors. Some residents will be glad it gives them a tool with which to fight new, higher-density construction; others will bemoan the fact that their children or relatives cannot afford to live nearby. That’s assuming property values go up or stay high in these neighborhoods.
Another side-effect of the historic appeal is false advertising, or more commonly, misleading advertising. Be careful with listing ads that cleverly use the word ‘historic’ in order to persuade a naïve home shopper to assume the home is actually in a designated historic neighborhood. Sometimes residents will collect money or use their own in order to purchase street signs with added space or text that imply historic designation. This often is done in an attempt to deceive consumers and real home values.
Moral of the story: Phoenix and all of its surrounding cities are blessed with old, original neighborhoods with residential appeal. Some have suffered; some have kept up thanks to the same residents or family members. Some have benefit from the blessing of historic designation for one reason or another.
If you ever need clarification on designated historic neighborhoods, or whether or certain property falls in this category, or any questions in general, feel free to send an e-mail or give us a phone call. As with any real estate decision, it’s always vital to do your homework and to also allow those in the know to help separate fact from fiction—in this case true history.
If you are Curious about historic neighborhoods in your area? Visit the Arizona Historic Preservation Office online @ https://azstateparks.com/shpo/