Sex, rugs, and rock n’ roll: 13 new (and strange) rules for surviving the real estate market

January 11, 2015, 2:37 PM UTC
A Tourist in Detroit
This Dec. 2, 2014 photo shows a street scene in Detroit, where it’s not uncommon to find dilapidated homes side by side with occupied homes. Thousands of abandoned homes dot neighborhoods around the city, which is struggling with massive urban blight as it emerges from bankruptcy. For tourists, a few neighborhoods appear to be in early stages of a resurgence with restaurants, hotels, museums and other attractions, along with clean streets and private security. (AP Photo/Beth J. Harpaz)
Beth J Harpaz AP

In one of the bigger acquisitions of 2014, Zillow purchased Trulia for $3.5 billion. The two companies created the market for online real estate listings and attract a combined total of well over 100 million visitors to their sites every month. Before these two firms were founded, there was no central depository for real estate data that the public could access, a dynamic that has made it difficult for the Average Joe to understand how the real estate market really works.

Now that the two companies are to become one, Zillow is an even more formidable force in the real estate industry, as well as a vital source for data on the housing market. On January 27th, the firm’s CEO, Spencer Rascoff, and Chief Economist, Stan Humphries, will publish The New Rules of Real Estate, a compendium of knowledge gleaned from the 3.2 terabytes of data processed by Zillow computers each day. The volume is loaded with secrets the average homebuyer or seller can benefit from, but here are the 13 we found most useful, or just plain entertaining.

1 Buy a house close to Starbucks

A man holds a Starbucks Corp. coffee cup in the Zhujiang New Town district of Guangzhou, Guangdong province, China, on Monday, Nov. 25, 2013. China's government may set its 2014 growth target at 7 percent, the Economic Information Daily reported on Dec. 3, citing the State Information Center. This compares with a goal of 7.5 percent for this year. Photographer: Brent Lewin/Bloomberg via Getty Images

While it's true that homes close to a Starbucks cost more than the national average, it's also true that they appreciate faster than the average home. Rascoff and Humphries hypothesize that this might be the result of the great work of Starbucks' 20-person location analytics team, which pores over data on traffic patterns and business density to pick the best places for their stores. If Starbucks' comes to a neighborhood, it's got a good chance of being the next up-and-coming spot.

2 Don't buy the worst house in the best neighborhood

The old saying goes, "real estate is about location, location, location." And if neighborhoods are what drive real estate prices, then following the oft-repeated advice of buying the worst house in the best neighborhood makes sense. After all, you can always fix up a house, but you can't move your house to a new neighborhood.

In fact, the folks at Zillow found that "the more affluent a neighborhood is . . . the worse that homes in its bottom 10 percent tend to perform." They hypothesize that this is because people who look for houses in expensive neighborhoods tend not to be cheap, and will overlook your house when they are shopping for a new home.

3 It's not impossible to find an affordable house in a good school district

School quality can vary widely from neighborhood to neighborhood, a dynamic that is reinforced by the fact that schools are largely funded by local property taxes.

That's why home values can vary so much between neighborhoods that are otherwise very similar. But by doing a bit of homework, you can find good schools at a great value. Rascoff and Humphries give the examples of Dublin, Ohio and Greer, South Carolina as towns where you can buy affordable housing in great school districts.

4 Foreclosed homes don't offer good value

A foreclosure sign hangs in front of a home December 14, 2006 in Miami, Florida.

Following the housing bust, the media was awash with stories of homes that could be had at rock-bottom prices. But looking at the data, Zillow found that there were good reasons why these homes were inexpensive. First of all, foreclosed homes tend to be smaller than other homes nearby, and banks often require purchasers to buy without a home inspection.

5 When selling your home, don't describe it as "unique"

MELBOURNE, AUSTRALIA - NOVEMBER 10: Some of the 10,000 dolls from around the world collected by Marie Prideaux are seen, some of which will be going into an exhibition at the Bendigo Art Gallery November 10, 2009 in Melbourne, Australia . (Photo by David Caird/Newspix/Getty Images) *** Local Caption *** Marie Prideaux

Analysis of online real estate listings show that the language used to describe a home for sale is incredibly important. Homes that are described thoroughly and honestly sell for higher prices than comparable homes that aren't, and Zillow was actually able to zero in on a few words that usually drive demand way down.

If you are selling, stay away from "unique." Homes that are described as such, "can sell for as much as 30 to 50 percent less than expected," Rascoff and Humphries write.

6 If you want to increase your homes value, remodel your bathroom

HOME IMPROVEMENT - "Reach Out and Touch Someone" - Airdate: November 26, 1991. (Photo by ABC Photo Archives/ABC via Getty Images) JENNIFER NASH;TIM ALLEN;JA'NET DUBOIS

Investing in your home through maintenance or remodeling almost always increases its value, but some projects pay off a lot more than others. For instance, "a $3,000 mid-range bathroom model ... replacing the toilet and light fixtures, adding a double sink, and adding some wallpaper--would result in a $1.71 increase in home value for every $1.00 you spent on the renovation," Rascoff and Humphries write.

In comparison, a pricier bathroom remodeling will likely return less in home value than you spend, while basement renovations tend to do the least in terms of increasing a homes resale value.

7 When listing your home, "The Price is Right"

Existing home sales reached a new eight-year high in June banishing memories of the subprime disaster.

Many people tend to shoot for the moon when selling a home. After all, if selling a home is a negotiation process, why not start high and come down from there, right? But the reality is that homes listed for close to their market value actually end up selling for 4% higher than homes that are initially overpriced.

That's because pricing a home at its fair value will attract more demand, and sometimes even start a bidding war.

8 The best time to list your home? Late March

CHICAGO, IL - MARCH 17: Members of the plumbers' union dye the Chicago River green for St. Patrick's Day on March 17, 2012 in Chicago, Illinois. The River was first dyed green in 1962 and has become a St. Patrick's Day tradition in Chicago. (Photo by Brian Kersey/Getty Images)

Most homebuyers begin contacting agents in May and June, so it's good to get your home listed in late March on average. That's enough time to make realtors aware of your listing, but not too much time that the home appears to have been langusihing by the time peak buying season begins.

However, this rule is a national average, and in colder locales like Boston, the best time to list is in early April, while places farther South call for listings a bit earlier. On average, homes listed in late March sell faster and for 2% more than comparable homes that are listed at other times.

9 Homebuyers can be really superstitious

A Colombian tattoo artist displays various scripts of the "666" during a religious ritual of the "Growing in Grace" movement 19 December 2007 in Bogota. At least a hundred members received identical tattoos in support of Jose Luis de Jesus Miranda, leader of the "Growing in Grace" movement, whose followers believe is the reborn Jesus Christ. AFP PHOTO/ Mauricio DUE-AS (Photo credit should read MAURICIO DUENAS/AFP/Getty Images)

It's no secret that people can be really superstitious, but it might be surprising to hear that this can affect the real estate market in a big way. One example? Homes with the number 666 (the number of the beast, according to the Book of Revelations) somewhere in the listing sell for 3.2% less than expected.

10 Cool street names will cost you

Penny Lane, street sign, Merseyside, Liverpool, England, United Kingdom. (Photo by: UIG via Getty Images)

If you want to live on Penny Lane or Thunder Road, it's going to cost you. Houses on streets with these names sell for 53% and 46% higher than the median home, respectively.

11 Manhattan isn't being overrun by emerging-market emigrants

Many think that foreign buyers of Manhattan real estate are mostly Russian and Chinese nouveau-riche looking for a place to stash their exorbitant wealth. But Zillow's data show that "Canadians and Brits are actually the foreigners flocking in greatest numbers to New York City."

12 Homeowners don't see as much action as renters

A sign advertising an apartment for rent is displayed in a window in San Francisco, California

Using Zillow data in conjunction with the General Social Survey, Rascoff and Humphries found that there are significant differences between the behavior of renters and owners. One fun fact: "In every age group, the percentage of renters engaging in sexual activity at least once a week is greater or equal to the percentage of owners knocking boots."

13 Homeownership isn't always the best way to climb out of the lower class

BAKERSFIELD, CA - FEBRUARY 6: A neighboring farm is seen through a broken and dirty window at an abandoned farmhouse on February 6, 2014 near Bakersfield, California. Now in its third straight year of unprecedented drought, California is experiencing its driest year on record, dating back 119 years and possible the worst in the past 500 years. Grasslands that support cattle have dried up, forcing ranchers to feed them expensive supplemental hay to keep them from starving or to sell at least some of their herds, and farmers are struggling with diminishing crop water and whether to plant or to tear out permanent crops which use water year-round like almond trees. About 17 rural communities could run out of drinking water within several weeks and politicians are pushing to undo laws that protect several endangered species. (Photo by David McNew/Getty Images)

Homeownership has a storied history in this country, and promoting it is a bipartisan cause. But as the real estate bubble showed us, owning a home can just as easily be a financial burden as it can help build wealth.

This is especially true for lower-class people, who typically cannot afford significant down payments and tend to live in neighborhoods where home values are most volatile. Homeownership should be the result of increased wealth rather than the thing that propels a person up the socioeconomic ladder.

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