Earlier this week I walked out the kitchen door and down the sidewalk destined for the neighborhood Food Lion grocery store. It’s a quick five minute walk to the shopping center and proves uneventful on most trips.
This day was a little different for a number of reasons. Half a block away from home, I bumped into a new neighbor. We started chatting about the neighborhood, the fancy downtown magnet school both of our children attend, and his most recent acquisition: oboe reeds. This guy had a different vibe than many other neighbors that moved here over the past several years. He’s completely white and fluent in English for starters. Solidly middle class. After doing some cybersleuthing later in the day, I realized he paid about 50% more for his house than what his neighbors did a few years earlier.
We shake hands and part ways after exchanging contact info to stay in touch (we’re neighborly like that down here in the South). I proceed to the grocery store in no particular rush (I’m retired after all). I enter the shopping center through the short cut by the dumpsters. And lo and behold there’s a homeless looking gentleman laid out on the sidewalk in the sun chugging a half gallon jug of whole milk. Not my first choice of mid-day beverage, but it was warm that day so I guess 64 fluid ounces of ice cold milk hit the spot, right?
Upon entering the store, the weird continued. The first customer I encountered was a lady cruising around in the store’s mobility-aid cart. She was yelling to her friend about WIC cheese. If you know who Fat Albert is, then read the following in that voice. Otherwise, read it in a very deep, throaty voice.
“Where da WIC cheese at? Hey, where da WIC cheese at? Ain’t nobody got no WIC cheese up in here. Where it at?”
“It ova heah” her friend suggests.
BEEP – BEEP – BEEP – BEEP – BEEP, she backs up the motorized cart.
“Where it at? Oh dat ain’t what I want. What else dey got? Where da WIC cheese at?”
A few more moments perusing the shelves.
“Dey ain’t got no WIC chedduh?”
At that point, I had to leave or else I might have lost it. Laughter, tears, anger; I wasn’t sure what emotion would come next. Look, I just wanted some string cheese for my kids (and I’m not gonna lie, for me too, because that stuff is deceptively good). It was on sale for a buck fifty for a 12 ounce package which is darn cheap for mozzarella, let alone mozzarella shaped and individually wrapped in portable one ounce snack sticks. But I couldn’t get to it because of the circus going on in the dairy aisle.
Lest I appear overly classist here, I genuinely feel for people that have to jump through those hoops to get a free block of cheese, and I have to assume there’s a better way to administer a governmental program to get nutrition (“nutrition”??) to people that need it. Our household has the option to apply for WIC, even though we clearly don’t need it. But there is no way I’d waste time on that given the hassles involved (at least in our state).
I don’t know if the lady in the go-cart got her WIC qualified cheddar cheese, but I did see her later. She was holding up the extremely long check out aisle, presumably with WIC related issues. I smartly chose to head to a different check out aisle, since I knew it would take quite a while to unravel her shopping basket mysteries at the cash register. Disaster averted.
In the meantime, I had the fortune to stand behind someone who appeared to be suffering from heroin or meth withdrawal. Either that or she was a really bad erratic dancer, twitching and swaying about to some unmusic heard only in her own head. At least it didn’t take long to ring up her hot dogs ($0.99), bologna ($0.99), white loaf bread ($0.78), Ho Ho’s ($0.89), bar-be-que sauce ($1.29), and sliced American cheese food product ($1.68). I’ve never had BBQ sauce on bologna or hot dogs, but it does sound like an interesting combo.
Fun times in the grocery store.
You’d think it was time to move given how sketchy the neighborhood grocery store is. But you would be wrong. It’s time for the “good” people to move near me. It’s time for GENTRIFICATION!
Very Humble Beginnings
Gentrification is already well underway in my neighborhood today. But that’s a recent development from the past couple of years.
We moved in 13 years ago when things didn’t look so rosy. It wasn’t the worst area of Raleigh by any stretch. But it wasn’t the best either. And there are plenty of sketchy communities scattered outside the perimeter of the neighborhood which don’t help our zip code’s demographics at all.
The neighborhood elementary school was in steady decline year after year, at one point becoming the worst school in the district based on poverty level of students at the school and test scores. We sent our kids there anyway. We took a gamble and it paid off (or perhaps our active involvement and promotion helped the school turn around?). The county school system decided to reboot the school, fire 80% of the faculty and staff, and start from scratch while dumping tons of financial resources into the school. Mission accomplished – there’s a waitlist now and plenty of applicants get turned away.
We encounter one of the enigmas of gentrification here. One of chicken and egg proportions. Did the vast improvement of the school (in spite of difficult socioeconomics still present today) fuel the gentrification, or at least remove one impediment to solid young middle class households relocating here? Or did the improving socioeconomics of households moving to our neighborhood lead to a higher quality of student at the elementary school?
After moving into our house, we realized one neighbor was going to be a problem. Three loud, angry pit bulls roamed his yard and stalked our fence line whenever we were in the backyard. The owners rarely paid them any attention, so their only option was to bark. And bark. And bark. Day and night. Incessantly.
That was a relatively peaceful time before the drive by shooting. To make a long story short, a 14 year old shot a 17 year old after their respective gangs were beefing at school. One of the gangs just so happened to attend a birthday party thrown by the family next door. The other gang decided it was time to retaliate. We got to see people running and jumping through our yard as the bullets flew and a huge puddle of blood in the street once the ambulance hauled the injured boy away.
Fortunately things have a way of working themselves out. The lady of the house apparently left. The man of the house remained, but appeared not to be working much (and I don’t think he was early retired, if you know what I’m saying). Not long after the shooting, the Rent-A-Center trucks showed up to repossess all their weekly rental items (TVs, stereos, computers, who knows?). Then the mortgage company foreclosed on the property and these bad neighbors became someone else’s bad neighbors. The guy that bought the house (and repaired all the damage and neglect) still lives next door and has two very quiet tiny indoor dogs. All quiet on the eastern front.
edit: I wanted to point out that 4,697 of the roughly 4,700 days that we have lived in this neighborhood have been rather boring and uneventful from a crime standpoint. And we have never been the victims of any kind of crime while we’ve lived here. We live on a lake, there’s tons of wildlife, and we frequently walk to the park, school, and library and don’t worry about crime given its inherently random nature. Life has treated us pretty well here, but there have been a couple of bumpy moments.
The wealthy are coming! The wealthy are coming!
The latest crop of new residents in our neighborhood all seem to be youngish, hip looking folks holding down solid middle or upper middle class jobs. That’s who used to live here a couple of decades ago. Former owners of my house include a local politician/lawyer/lobbyist and a successful small business owner.
However, over the last couple of decades the property prices lagged and this opened the doors to the great unwashed masses who couldn’t afford the pricier new homes going up elsewhere in town (or didn’t want to add an extra 20-30 minutes to their commute!).
Good or bad, I don’t know. It brought a lot of diversity to the neighborhood and most of the residents are totally awesome. But it also let in people like my former next door neighbor, Mr. Drive By Gang Shooting. Those kind of people seem to take care of themselves, and now there’s a whole new crop of buyers looking to escape the ridiculously priced, sometimes crappy accommodations in the really exclusive part of town and move a couple miles north or east to scoop up large yards, old trees and extra square footage at a fraction of the price.
Thanks to their money, our neighborhood real estate market is on fire. It’s common to see sales at asking price within a day of listing assuming the price isn’t crazy.
|Jan 2015||Oct 2016||% Change|
|Root of Good House||$163,000||$185,000||13.5%|
In numerical terms, our house, and our neighborhood overall has slightly outperformed the rest of the zip code and Raleigh as a whole by a few percent. I don’t think this fully reflects the limited supply and speed of sales in our neighborhood, but maybe it’s a larger phenomenon than I think.
A few years ago there were plenty of fixer uppers in the $100,000 price range with renovated houses selling for $150,000. In what seems like an overnight shift, it’s hard to find any houses asking less than $150,000 while most houses are asking in the $180,000 to $220,000 range (and selling at those levels quickly).
These kind of upward price movements probably don’t seem like a big deal to folks in high priced and fast appreciating cities like New York or San Francisco/Silicon Valley. But for a place like Raleigh where house prices barely kept up with inflation for the past decade or two, this is a big deal.
I’m obviously the worst real estate investor ever for not buying up all the $100,000-120,000 houses I could get my hands on, renting them for several years at a nicely positive cash flow, then flipping them for $200,000 a few years later. Maybe next real estate cycle I’ll have more time on my hands and a clearer crystal ball.
What I don’t know is how long this trend will continue. I’m still carrying my house at a value of $140,000 in Personal Capital because I’m not sure it’s actually worth the $185,000 projected by Zillow – they don’t know we have a partially “vintage” 1972 kitchen – and I would only get around 94% of the sales price if I sold through a realtor. Eventually I’ll bump up the carrying value if these higher prices stick around. I have no plans to sell even if the value went up another $50,000, so for now it’s just a somewhat arbitrary number on a screen. And in terms of our $1.6 million-ish net worth, what’s an extra $50,000 in an illiquid asset that I can’t live in if I sell it? Though at some point we would be foolish not to evaluate a scenario where we sell our house and move somewhere less expensive in this city or elsewhere in the nation or world. Since we aren’t hurting for money, the payoff would have to be rather great to make it a worthwhile move (<– see what I did there?).
Thanks to this gentrification, I’ve grown a little wealthier (even if I haven’t fully recognized it on my balance sheet). Our streets might get a little safer. And our neighborhood will have just a bit more clout in City Council when it comes to doling out government funny money for pet projects (like that multimillion dollar park upgrade coming our way).
Some complain about higher property taxes after their area undergoes gentrification, but that won’t be an issue for us for at least seven more years since the county reassesses all home values every eight years and 2016 was the most recent reassessment (our home value inexplicably went down by seven thousand dollars). Since our property taxes are already low at $1,500 per year for a fairly average house in the neighborhood, a doubling of property taxes wouldn’t be a huge hardship for most.
As the gentrification proceeds, I expect it will be a virtuous feedback loop of increasing values making home renovations and improvements more sensible investments, which makes the neighborhood look nicer, leading to more price appreciation.
If things keep improving, eventually we’ll have the tear down phenomenon seen elsewhere in Raleigh. Someone might purchase my house for $200,000 or $250,000 with the intent to bulldoze the house and building a McMansion from the ground up. In essence, they are paying a large sum of money for the land underneath my house. Some folks REALLY hate this phenomenon because “it destroys the aesthetic quality of the neighborhood”. In our case, it’s predominantly 1960’s and 1970’s split levels and ranches, so I’ll be interested to hear the objections I am sure many neighbors will lodge against tear downs with rebuilds.
In the meantime, the new folks moving in are classing up the block with their chicken coops. Why go to Whole Foods for your free range eggs when you can raise them yourself in your backyard? I’ve already spotted several Subarus sprouting up in driveways. Next I expect they will request bike lanes painted on our neighborhood streets.
The downside of gentrification
All this new money flowing into the neighborhood isn’t all positive. Over time, lower income residents will move on to other neighborhoods and be replaced by more homogeneous middle and upper middle income residents. No longer will the smell of the tamales and garlic rich dishes wafting out of the open kitchen windows tickle my nose as I stroll down the block. Kale smoothies don’t really have much of an odor. Hearing only one language at the neighborhood park will leave me wondering “where did all my former neighbors go?”.
I used to recommend my neighborhood to everyone that would listen. Cheap, large houses on large lots just a few miles from the city center in an up and coming neighborhood. As the prices keep rising, I’m afraid I can’t make such a strong recommendation any longer. If this trend continues, it will be hard for friends relocating to this city to move to my neighborhood. In another ten or fifteen years when my kids are in the market for their first house, they might have to look elsewhere instead of buying in this area like we did for our first permanent house.
This past weekend we met up with some friends at the neighborhood park to play some tennis (a notably middle class or wealthy sport). We are usually the only ones using the two courts. Very rarely will another party use the second court. This time, we had to squeeze our whole party onto one court to make room for another pair. Then another family approached to play. And another. Gentrification means crowded tennis courts for us. Now I know how the folks competing for the basketball courts and the fútbol fields feel since that’s what is usually jam packed on nights and weekends.
Perhaps the worst part of gentrification, should it continue, will be the loss of all the ethnic grocery stores and restaurants. What will life be like without the panaderías, tortillerías, Latino, Asian and African groceries, and restaurants from all over the world? Who would want to give all that up for organic coffee bars, hot yoga studios, a skinny jeans shop, a cronut shop, and a boutique oil dispensary? Maybe some of those ethnic places will survive the cultural shift and stick around. I wouldn’t mind most of the tattoo parlors, hair salons, nail salons, and pawn shops disappearing though. And please don’t convert my Walmart to a Target.
Or maybe this whole home price increase is a flash in the pan and gentrification won’t actually stick to my neighborhood.
Gentrification can take a looooong time. Get ready to be patient and make sure you can live in a less than perfect setting long term.
Embrace the good and the bad of your situation and make the most of it because it might be a while before it changes. Enjoy the cultural differences to the extent possible. People that are different from you rarely bite, and those that do often get the boot as Mr. Drive By Gang Shooting did. Instead of flying half way around the world to experience a different culture, you might encounter it next door instead. From that point of view, moving into an “up and coming” neighborhood can be a great experience if you’re open to it.
Don’t count on gentrification to make you rich. The timing of gentrification is uncertain, and it may not happen at all. Investments in your property might not pay off if gentrification never comes to pass.
Overall, I have mixed feelings about gentrification. I don’t mind sharing my neighborhood with the poor (even the homeless), minorities, those of a lower social class, recent immigrants that might not speak English (yet), those of low educational attainment, or other societal outcasts that didn’t quite make it all the way out to the suburbs. Mrs. Root of Good and I both have some of those groupings in our recent family history. Those people are probably more fun than a lot of upper middle class people anyway. We count many of them as friends. Many times these people value education, wealth, success, and achievement as much as the upper classes, but come from disadvantaged backgrounds and never had the resources or motivation to climb the socioeconomic ladder.
On the other hand, with gentrification comes changing social expectations and peer groups. I think we fit in better with the low to moderate income households in terms of visible spending, and feel more peer pressure to keep up with the Joneses when mingling with the comfortably middle class or upper class like those that seem to be moving in to our neighborhood. I doubt we’ll actually spend more money as a result, but it’s a tricky spot to be in. For example, do we prevent our kids from participating in expensive activities that all the other kids are into just because the activity is a horrible value (but one we could easily afford?). Do we still bring $3-5 bottles of wine to neighborhood parties when everyone else brings $20 bottles? Will neighbors still attend our house parties if we’re the last house on the block sporting an original 1972 kitchen? It’s probably much ado about nothing, as most of these newly minted neighbors appear to be of the live and let live variety, but one never knows what it’ll be like in another five or ten years.
We’re very fortunate to have the luxury of wealth such that we don’t really care if our house price drops by $50,000 or goes up by $50,000 because it won’t materially impact our daily lives and spending decisions. We lose more than that in a day sometimes so it’s no biggie. Instead, we enjoy living in a convenient location that’s close to things we value like a variety of budget shopping and dining choices, parks, schools, libraries, and entertainment options. When we bought our house, the low price combined with these other features made it the right choice for us. We liked the neighborhood well enough, warts and all. Over time it looks like it’s improving from a price appreciation standpoint, and with that comes a change in demographics and socioeconomics.
Have you ever experienced gentrification first hand? Are you trying to find the next “up and coming” neighborhood before it gets discovered? How do you do that?
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