How to find your Best Place to Live

Before you choose a town, you need to gauge whether a home there will be a solid investment. This five-part checklist can help.

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By Amanda Gengler, Money magazine writer

(Money Magazine) -- The past year proved just how dramatically the health of the housing market can vary from one part of the country to another. But what you may not realize is that variation within metro areas can be just as large.

Take the Boston suburbs. Median home values in Wayland have dropped 14% in the past 12 months, while those in Belmont have fallen only 2%.

Such stats have huge implications for anyone looking for a place to live. Let's say you're hunting for a town within commuting distance of your job in the city. How do you find one whose homes have the best shot of holding or increasing their value, no matter what the housing gods throw at you?

The task is not as hard as you may think. Real estate experts say that areas where homes retain their values best in tough times tend to have certain things in common. They include:

Proximity to the city. When home values were soaring, many buyers could afford houses only in the exurbs. But grueling commutes and high gas bills are a drag - which helps explain why prices of homes more than 40 miles outside city centers have generally dropped the most, says Ken Shuman of real estate site Trulia.com. For example, he says, homes in Antioch (45 miles from San Francisco) fell 37% in the past 12 months; those in Walnut Creek (25 miles away) fell 18%.

How to check it out: Look up typical commute times on zillow.com (search for the town and click on the Local Information tab). If they're longer than those of most other towns in the area, that's a red flag. Even better, clock the drive yourself, during rush hour.

Great schools. Parents will do just about anything to enhance Junior's college prospects. That's why home prices in towns with excellent public schools generally hold up best during downturns, according to a 2008 Trulia.com study - and why you should favor them even if you have no rugrats of your own.

How to check it out: Go to schoolmatters.com and schooldatadirect.org and search for test scores and graduation rates of schools in town. Avoid towns whose schools have below-average stats for the area or those where the numbers have been trending down lately. "You want to see consistent performance over multiple years," says Susan Shafer of Standard & Poor's School Evaluation Services. To make sure budget cuts haven't forced a school to trim classes or extracurricular activities, visit the school's website or call its office and ask.

Strict limits on new construction. Towns where zoning regulations made it tough to build have seen much smaller price drops than towns that had huge building booms in recent years. "Prices are more likely to go higher if you can't expand supply," explains Daniel McCue, research analyst at the Harvard University Joint Center for Housing Studies. Another good sign: The town nestles against a barrier, such as a large lake or protected wetland, that limits expansion.

How to check it out: Call the town or county planning office and ask how many acres of vacant land are in town, how much of it is zoned for residences, and the maximum number of homes that can be built. Let's say you find that most of the vacant land is set aside as a nature preserve and the buildable land is zoned for no more than one house per acre. That's better than if all the vacant land is buildable at a rate of three houses per acre. Also ask for a copy of the town's master plan, which should tell you how much the housing stock is set to expand in the next 10 years. No plan, or just a bare-bones one? That's worrisome.

Plenty of commerce. Towns with stores, banks, and movie theaters - plus some large white-collar employers - are a better bet than those that are nearly all residential. People like to live near these services and jobs, and they give a town a stronger tax base to fund things like police and snowplows.

How to check it out: Call the local assessor's office (you can find it on the town website or by calling town hall) and ask what percentage of the town's tax receipts come from individual residents vs. businesses. You want to see about 25% to 35% from businesses, says MIT economics and real estate professor William Wheaton. Next ask for a list of the town's largest employers. Does it include white-collar companies, like a hospital or an IT firm, with more than 50 workers? Thumbs up.

Lots of flower boxes. And manicured lawns, carefully tended parks, and well-maintained streets. "The value of one house depends on the surrounding neighborhood and properties," explains Wheaton. Conversely, towns with overgrown parks and noticeably vacant homes generally aren't great bets.

How to check it out: Find the rate of new foreclosure listings for each town you're considering on realtytrac.com. (You can also see a map of where the foreclosures are.) Look for places where the rate is among the lowest in the vicinity. Note that there can be huge variation between nearby towns: In the Sacramento area, for example, Woodland had 11 times as many foreclosures in May as similarly sized Davis, 10 miles away. And don't forget to use your own eyes. Drive around without a realtor (who may steer you away from any problem areas). Because when it comes to choosing your own best place, numbers just aren't enough.

Adam Bluestein, Beth Braverman, Jenny Everett, Alexis Jeffries, Jessica Levine, Sarah Max, Christopher Reardon, Donna Rosato and Pieter Van Noordennen contributed to this article. To top of page

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