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Judy Hedding

Best Zip Codes, Worst Zip Codes: When Good Statistics Go Bad

By March 27, 2006

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Recently Forbes.com came out with a list of the ten best and ten worst neighborhoods in the U.S. in which to buy a home. Did the ten best neighborhoods have the best schools? the fewest violent crimes? Did the ten worst have gang activity? too many strip clubs? bad Chinese restaurants? No, none of those were taken into consideration, I'm afraid.

The lists were based on home value appreciation between 2003 and 2005.

The good news: Phoenix made the best ten list!
The bad news: Phoenix made the worst ten list!

Specifically, ZIP code 85050 at Desert Ridge/Tatum Highlands had a total home value appreciation of 74.6%. That earned it a rank of tenth best in the nation. ZIP code 85054 at Desert Ridge/Montage came in at second worst in the nation, where the homes actually declined in value in those same to years by 22%.

Does that make sense? For those of you that aren't familiar with the area, these two zip codes are basically in the same neighborhood. Without spending too much time on real, valuable research, it's comparing a neighborhood that has had new luxury subdivisions built within that 2 year period, compared to a good neighborhood that was basically already established.

As for the analysis on 85054, the Forbes list states:

"2005 Median Sales Price: $289,950
Total Price Appreciation 2003 to 2005: -22.3%
Appreciation for New Homes: NA
Appreciation for Existing Homes: 34.9%"

I must be missing something. What is there besides new and existing homes that made the total appreciation a negative number?

Finally, I don't know exactly why Forbes.com chose to define those zip codes by specific subdivision names located in those zip codes.

So here's the real deal. I can't tell you about other cities, but in Phoenix, neighborhoods are not defined by zip codes. Some zip codes are large, some are small, some are relatively undeveloped, some are fully developed with basically no new residential development. Some that had smaller older homes, may appreciate faster than some that have newer bigger homes. Which would you rather have--a $70,000 home that appreciated by 100% making it now a $140,000 home? or a$300,000 home that appreciated by only 50% making it a $450,000 home? It all depends on why you are buying.

In any case, these lists are fun to read, but I wouldn't make significant family decisions based on them. Do your research. Buy a home you love in a nice neighborhood that meets your family's needs--schools, retirement, recreation, shopping, proximity to work, or whatever other criteria you have.

You can read the entire Forbes.com article here.

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