What makes a house recession-proof

Principles of durability

Location is just one piece, albeit a big one, of recession-proofing. When buying, these principles matter, too:

The "progression" principle. This rule of thumb says better homes bring up the value of a not-so-great house nearby. (And lesser homes subtract from nearby property values.) The lesson: Don't buy the best house on the block.

George Baker, an expert in residential and commercial appraisals with Vestor Realty Consultants in Wilmette, Ill., knew this when he purchased his 2,400-square-foot home surrounded by 5,000-square-foot palaces. "Its value is enhanced by the fact that it's on the block with better, larger properties," says Baker, who is also a real-estate broker.

Single-family homes rule. Condominiums lose more value in a down market, and they lose it faster than single-family homes, says Terry Bernhardt, a Portland, Ore., home appraiser. In part that's because builders tend to throw up too many condos when a market is hot. Also, it's because more buyers want single-family homes than condos. In Portland, Bernhardt says, "middle market" houses hold value best because even in a downturn, more people want them.

Some trends endure. In Bernhardt's market, the craze is Craftsman bungalows. He thinks it's a durable trend. Craftsman homes have charming, slightly nostalgic designs that include covered porches, a mix of indoor and outdoor living areas, higher ceilings and lots of architectural details, including moldings trim, stair rails, and built-in nooks and bookcases.

"It's a warm, attractive design that everybody seems to like, and it prices up substantially," Bernhardt says. Don't bank on a trend, however, without doing plenty of research into what sells in your particular market.

Low carrying costs seal a deal. Buyers may face a shock when confronted by the real cost of a home, in addition to the taxes and mortgage payments. The carrying cost of a house -- including homeowners insurance, utilities, upgrades, deferred maintenance and, in some markets, landscaping and snow removal -- can make a deal unattractive.

Homes that have these costs under control retain value when buyers compare them with homes that have higher yearly carrying costs, says Baker, the Wilmette appraiser.

Market peculiarities matter. As with politics, all real estate is local, so learn your particular market inside out. (Before you buy, get an education as you interview prospective sales agents. Ask each one what's selling and why.)

Apply this knowledge by keeping the home's next owner in mind when you buy or build, says Sandoval, the owner of Windermere Port Townsend. In her small city -- a somewhat remote waterfront community attractive to retirees -- single-level, low-maintenance houses are weathering the market slump best. The town's many beautiful Victorian homes no longer fetch premium prices because these empty nesters shun the upkeep responsibilities.

Market peculiarities even vary by neighborhood. Take suburban New Jersey, where large communities of observant Jews obey the biblical proscription to avoid work on the Sabbath. That includes walking, not driving, to religious services. Thus locations near conservative and orthodox synagogues hold value extremely well in places such as the Highland Park and Edison municipalities near New Brunswick, says Justin Footerman, a broker-associate with Prudential Fox & Roach Realtors in North Brunswick.

Remodel to support value

When you're thinking of investing in upgrades, you can build in more enduring value by following these rules of thumb:

Broad appeal. In a shrinking universe of buyers, homes with the broadest appeal hold their value best. The homes most in demand are three-bedroom, two-car-garage houses with at least two bathrooms. Keep this in mind when you're thinking of remodeling. When comparing the wisdom of adding a new, high-end kitchen, for example, versus a bedroom addition to your two-bedroom home, the addition is probably your best bet for durable value.

That's why, when Port Townsend agent Sandoval and her husband built their home, she vetoed his idea of putting the kitchen and living areas on the third floor, with the best views. Such "reverse floor plans" appeal to too few people, she says. He also wanted to forgo installing a dishwasher. He made a good point: They didn't use one. But "if you built a house uniquely for yourself, with no dishwasher, four levels and concrete floors throughout, there are going to be fewer people likely to like that house," Sandoval says.

Attractive bathrooms and kitchen. These rooms, with all their costly plumbing, wiring and cabinets, have the highest value per square foot of any in the house. Investing in their upkeep props up a home's price, says Portland appraiser Bernhardt. Extravagance isn't helpful. Buyers are simply looking for well-appointed, updated rooms with good layouts and appliances.

"Purchase decisions on residences are typically made by the woman of the house," Bernhardt says, "and they are going to go with where they have to spend the majority of their time."

Upgrades for energy efficiency. Improvements to a home's energy efficiency promise a lower cost of upkeep, so buyers pay attention. Good investments include highly efficient windows, beefed-up insulation, new siding and appliances.

On the other hand, highly personal investments such as lavish kitchen remodels, swimming pools, game rooms and media centers may even detract from a home's price, at least in Portland, Bernhardt says. That's because few buyers may share your tastes. A new owner may see your swimming pool as a liability or a nuisance that must be torn out at great expense.

Published Jan. 9, 2008

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