Dream Home?  Maybe Not, But Dream Price

Everyone in real estate (and many outside of it) knows the phenomenon:  homes on busy streets turn over more often.

The explanation is self-evident, right?  The occupants get tired of the traffic and move on.

That may certainly be true, but as a Realtor, I see another, economics-based explanation.

Namely, houses on busy streets sell at a discount that is an appealing trade-off to at least some Buyers (and sometimes, builders), but who also have a shorter time horizon.

Calculating the Discount

In general, the busier the street, the bigger the discount.

However, two other factors loom large:

One. How pronounced is the noise from inside the home?

At one extreme, there are homes set back on deep lots well above (or below) street level.

Once you’re in the home, you can hardly tell.

It’s also the case that strategic landscaping (including fences) can buffer exposure to a busy street.

house 3Finally, a good architect and builder will orient the home away from a busy street, just like they’ll orient it towards a skyline or lake view (assuming the busy street was there first; in the Twin Cities, 35W bisected ” and arguably destroyed ” block upon on block of gorgeous, vintage homes in South Minneapolis when it was created in the 1960’s).

Bottom line:  some homes on busy streets feel like Grand Central Station inside, others are serene and quiet.

Two. Who is the Buyer?

For a family with little kids, a home on a busy street may very well be a non-starter ” the proverbial “deal breaker.”

In that case, the busy street discount is theoretically infinite.

At the other extreme, downsizers who want a backyard for their pet or garden ” and therefore aren’t ready for a condo ” might not care much or at all.

Starter Homes for Move-Up Buyers

Blend it all together, and my sense is that the average “busy street” discount is 10% — 15%, with a lot of variation.

What does that mean in the housing market?

A prospective Buyer who’s eyeing a neighborhood where prices start, say, in the low $300k’s but can only afford high $200k’s now has a shot.

busy streetWhich they take.

A few years later, when the Buyer’s credit is stronger, they’ve gotten a raise (or two), and maybe have a kid (or another one), they have the motivation and wherewithal to trade up.

Often in the same neighborhood, I might hasten to add, at least in the Twin Cities.

Owners vs. Renters; Housing Dynamics

So, what type of Buyer frequently seeks out homes on busy streets?

Investors, i.e., would-be landlords.

All that exposure = free advertising to prospective renters.

However, if/when (more transient) renters start to predominate on a block, that creates its own side effects.

As in, more turnover begets more turnover.

See also, “Marketing a Home on a Busy Street”; “You Can’t Change a House’s Location (Can You??)”; and “Garage/Driveway Switcheroo.”

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.
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