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- One Way To Predict A Stable Neighborhood: See If A Gym Offering Daycare Is Nearby
One Way To Predict A Stable Neighborhood: See If A Gym Offering Daycare Is Nearby
Kevin Graham7-Minute Read
October 13, 2020
When you’re looking for a home or investment property, there are probably several factors you take into consideration, in addition to the actual property. Home values, crime, quality of schools, and the average income and education of an area’s residents are all aspects you may use to judge the stability of a neighborhood. Finding out this information could become very time-consuming and frustrating. But we found a potential shortcut that could make figuring out this information as easy as asking one question: Is there a health club offering daycare amenities to its members nearby?
Why Look For A Health Club With A Daycare?
We recently did a study on over 40 zip codes across the U.S. where Rocket HomesSM has real estate listings and found that having a gym that offers daycare in an area could be a simple way to figure out if an area is stable and good place to invest in property. Simply put, where there’s a health club that offers childcare amenities, there’s a strong correlation with higher property values and several other factors that indicate a stable neighborhood, in our analysis.
If you don’t believe me, let’s dive into why this is the case, as well as the methodology we used in our analysis.
When businesses expand locations, they put franchises in areas that have potential for the business to grow. That might seem obvious, and it is. The new business needs customers who can afford to buy the products or services the business sells. So, they do their research and find an optimal location. This got us thinking. Could a potential home buyer use the locations of such businesses as an indicator that a neighborhood is stable?
Money makes the world go ’round and it’s no different here. Gyms that offer daycare tend to be on the premium side, which means they usually have a premium monthly rate. Since a gym membership isn’t a necessity, people who have money for one tend to have a higher level of disposable income. In addition, most people use a gym that is convenient for them during their days and evenings, which often means they choose gyms close to their home.
In our analysis, we looked at 44 ZIP codes across the U.S. where Rocket Homes has real estate listings. The ZIP codes also had at least one gym offering daycare amenities in their boundaries. We then used data from Rocket Homes, the Census, FBI crime reporting, Great Schools, and the American Community Survey to compare property values, crime rates, quality of schools, income and education levels of residents against state averages
When comparing our ZIP code sample average property values to state averages, 93% of the ZIP codes had higher values than state mean property values (41 of the 44 ZIP codes). Of those that are lower than the average, all three are in California. Considering California’s extremely high average property value, this is not surprising (when at state’s average property values are as high as California’s, it’s possible that even areas slightly under the state average are high-value, stable neighborhoods).
The bottom line: our ZIP codes had a blended average 78% higher property values than corresponding state avg values. Considering that, you can presume with pretty good confidence that if you see a gym that offers daycare in an area, that area will have higher than average property values. Next, let’s look at crime.
Every homeowner wants to know they’re living in a safe area. This is doubly important if you have children at home. For this section, we looked at FBI crime data. We were able to get specific data on 37 of the ZIP codes in our sample. The remaining ZIP codes didn’t have specified crime rates because they were included in the totals of a larger city. Still, in the ZIPS we were able to get specific crime data, 34 of the 37 ZIP codes had lower than state-average crime rates. That translates to 92% of the ZIP codes in our sample had a lower crime rate than the state in which it is situated.
The range of lower crime rates in our sample was from 5% – 88% lower than state averages. Most of the ZIPs with just slightly lower crime rates came from states that already have lower than national average crime rates (Massachusetts, for example). Using our entire ZIP sample, the average crime rate was 47% lower than corresponding state crime rates. Check this off the list. Next, we’ll look at education level.
The education level of residents is also a huge determinant in stability and quality of a neighborhood. It comes down to dollars and cents. On average, there’s a significant increase in earnings if you have a bachelor’s degree as opposed to a high school diploma (according to the U.S. Bureau of Labor and Statistics, workers with a bachelor’s degree make about $400 more weekly than high school grads, or about $21,000 a year).
There is a strong correlation between income of a neighborhood’s residents and the stability of a neighborhood. When we reviewed our sample ZIP codes, 41 of the 44 ZIP codes had measurably higher percentages of residents with bachelor’s degrees than state averages of the percent of population with bachelor’s degrees. And the remaining three ZIP codes were actually inconclusive, so in reality none of the ZIP codes had lower than state average level of education. Using the 41 of 44 that we are certain have higher education levels, that translates to 93% of our sample ZIP codes having higher levels of residents with bachelor’s degrees vs. corresponding state averages. Check education level off our list. Next, we’ll go to local school ratings.
One of the key factors in determining whether an area will attract families is the quality of the schools. This, of course, contributes to a neighborhood’s overall strength and stability. To compare the ratings of schools in our sample ZIP codes against state average school ratings, we used the Great Schools national school rating database. Great Schools rates all elementary, middle and high schools in the U.S. on a 10-point scale. We were able to identify 125 schools within the sample ZIP codes that contained a gym offering daycare amenities. Of those, 88% of schools were rated equal or above state averages.
Of all the factors we considered when comparing our sample ZIP codes against state averages, school rating was the closest to state averages. Many schools scored equal or just 1 or 2 points above state averages. However, with 88% of our sample ZIP code schools scoring equal or higher, we consider this check on our list. Finally, let’s look at average household income.
Household income of a neighborhood’s residents is probably the top indicator of a stable and growing area. This in in no way is suggesting that lower income areas are not stable and great places to live. But neighborhoods with higher average income tend to be able to weather difficult times better than less prosperous areas, as well as having more resources that improve quality of life. Higher income allows for more wealth growth and the likelihood that that wealth will be passed down to future generations.
For the income portion of this analysis, using Census data, we compared sample ZIP code household earnings to state averages. With only three of the sample ZIP codes reporting lower than U.S. average household income, we found that 93% of our sample ZIP codes had higher than state household income. To put these numbers in perspective, the average income in the states studied is $88,075. The blended average household income in the ZIP code sample was $135,568. That represents a 54% average higher income for our sample ZIP codes than corresponding state averages.
Once again, our sample ZIP codes, containing a gym offering daycare amenities, score higher than state averages. Check that off the list. We are five for five!
There’s no single magic indicator for choosing the right place to live if you’re looking for a home, but as we’ve seen, having a gym with a daycare nearby can likely be a strong indicator a neighborhood is stable. In every analysis, whether it be home value, crime, education level, quality of local schools, and income, the vast majority of our sample ZIP codes analyzed outperform state averages.
This is in no way incurring that all stable neighborhoods have gyms with daycare amenities, or that the gyms have any affect on the stability of a neighborhood. This is simply stating one thing: When searching for a stable and good neighborhood to live in or invest, if you happen to notice a gym with daycare, you likely have found a good contender. That’s advice I wish I had when I was house hunting!
1 Rocket Homes Real Estate LLC and Rocket Mortgage are separate operating subsidiaries of Rock Holdings Inc. Each company is a separate legal entity operated and managed through its own management and governance structure as required by its state of incorporation, and applicable legal and regulatory requirements.
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