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Property-Value Movement in Old North Durham

By Valtcheva Katerina DP_ValtchevaKaterina

The part of Old North Durham around Foster St. and Geer St. has historically been an industrial neighborhood. It was generally considered a bad area of Durham despite its proximity to the central business district. In the past few years, this part of the city has been subject to some changes in development patterns, which have begun to transform the neighborhood. I will present my analysis of property-value movement in the area and examine it in the context of the new businesses that have been opening in the area. My hypothesis is that this recent commercial upturn, which was organic in origin, has had a positive impact on residential property prices in the part of Old North Durham that lies on and surrounds W Geer St. In order to confirm this hypothesis and quantify the impact of the new developments on existing structures, I have compared forty houses in Old North Durham (in proximity to Motorco Music Hall) with forty houses in East Durham and Edgemont over the last eight years. I have used Zillow estimates to obtain house value appraisals, collected annually, for the first month of each year starting in January 2006 and ending in January 2013.

Old North Durham initially developed with the construction of tobacco warehouses, as well as related commercial and industrial ventures nearby. North Durham Elementary School has had an influence on the area with respect to social development, while the Farmers market has also been influential in the area’s development as a center of Durham’s alternative lifestyle scene. However, for quite some time the area has been known as a rough part of town, and public perception to this effect has only recently begun to change.  I believe that this trend started with the opening of several bars and restaurants in the area: Fullsteam Brewery was opened on August 13th 2010 on Rigsbee Ave; in 2011 a popular bar and music venue, Motorco Music Hall, was opened right across the street from Fullsteam; and a restaurant called Geer Street Garden, on the corned of Foster St. and Geer St., followed on May 5th the same year. Further, in the end of January 2013 a café called CocoaCinnamon—the area’s most recent addition—opened its doors across the street from Geer Street Garden. Interviews with the owners of these businesses revealed that a big part of what drew them to the area was not government policy, but a combination of its proximity to the city center and its industrial aesthetic: indeed, Fullsteam Brewery occupies a prior soda bottling facility, Motorco a car dealership, and CocoaCinnamon an automotive repair shop. The buildings that were chosen for these additions to Durham were not only located a short walk away from W Main St and the commercial heart of the city, but also happened to be particularly suitable for the type of bars, restaurants, and clubs that their owners were searching for.[1] ,[2], [3]

The area I have chosen to compare Old North Durham to is similarly industrial, with its historical roots in milling and textiles. East Durham and Edgemont’s two textile mills have been turned into a retirement home and office spaces, which made them unavailable at the time when Old North Durham was chosen to host Motorco Brewery.[4] Other reasons why I have chosen East Durham/Edgemont for my control area are that its houses are very similar to the ones around Motorco, built around the same time period, and that it is approximately the same distance away from the central business district as Old North Durham is. As of 2006, the area was more economically depressed than Old North Durham, but there are two reasons why I don’t believe that makes the results of this study less significant. The first is that, for the purpose of this study, I am interested in relative changes of values between the two neighborhoods pre- and post-2010. The second is that the difference would only be marginal to someone who is already taking the risk of opening a new business in Old North Durham.  While the worse-off state the latter neighborhood does not distort the findings of the study, is nonetheless one of the factors that may have contributed to Geer St. and Rigsbee Ave’s housing Durham’s urban revival. However, this result is better explained by the fact that the industrial buildings existing in East Durham/Edgemont were either unavailable or poorly suited for housing breweries and cafes at the time Fullsteam opened.

Now I would like to focus on how I selected properties for use in a quantitative comparison of development in these two areas. House values representative of the Motorco area in Old North Durham come from forty homes that are located on one of the following streets: W Geer St., North St., Hargrove St., Glendale Ave, Northwood Cir, and N Mangum St. The average house size of this sample is 1375 ft2 (± 523 ft2.) The average lot size is 6121 ft2 (±1640 ft2.) The year these properties were built ranges between 1910 and 2004. The average year built is 1937 (±20) years. For my control group in East Durham and Edgemont I have chosen houses on one of the following streets: Hart St., S Driver St., Roberson St., Angier Ave, Vale St., S Plum St., E Main St., Clay St., and Ashe St. The average home size in the control area is 1432 ft2 (±476 ft2.) The average lot size is 7047 ft2 (±1413 ft2.) The year the homes were built ranges from 1900 to 1992 and averages to 1929 (± 21) years. Although the area I have chosen for the controlled sample closely resembles North Durham in many aspects, the house lots there were generally bigger than the ones in North Durham. For the purpose of creating a better group of comparable properties, I have excluded some houses with significantly larger lots.  Moreover, the majority of houses in East Durham and Edgemont were built between 1900 and 1910. Therefore, I included in my sample as many of the later-built houses in the controlled area as possible in order to create a sample that more closely resembles the properties I had chosen in Old North Durham. With this changes, the group I control for has an average lot size of about 900 sq. ft. more than the sample of the North Durham area. The statistical analyses discussed below demonstrate that this is not a big enough difference to significantly distort the finding of my study, as the relationship between house prices and house size and amenities is much stronger than the relationship with lot size.  This is especially noticeable in a town such as Durham where land is not a scarce commodity, as opposed to a place such as New York City, where such a difference in lot sizes would have been significant.

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Figure 1: Property value information collected from zillow.com

To explore the trends within home values in Old North Durham and East Durham/Edgemont, I first normalized property values of each house by the square footage of the house. I also normalized each property value by the historic average price of housing in Durham at large for January of the corresponding year (fig. 1) in order to ignore the effects of the housing bubble and bust. For the time being, I have ignored the effects of lot size, as normalizing by that value would imply a linear relationship between lot size and overall property value—a false assumption in this environment. I first plotted mean property values in the two areas prior to 2010, in order to see how house prices in the two areas have been moving prior Old North Durham’s recent commercial development. I found the best-fitting line between the points for each group and I observed a positive change in house prices for this time period with a difference in their slopes of .0113 in favor of the control area (fig. 2 and 3). This does not indicate a significant difference in the house price movements between the two areas prior to 2010.

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Figure 2

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Figure 3

When plotting the data for all eight years, the picture changes dramatically (fig. 4 and 5). House prices continue to rise in Old North Durham through the entire time period (though, with the addition of datapoints through 2013, the slope of the price curve falls from .0206 to .0108), while the overall trend in house values in East Durham/Edgemont has become negative. This means that the recent fall of house values in the area has been so great that the slope of the line describing the overall trend of house prices went from positive .0319 (between 2006-2010) to negative .0275 (when datapoints are included through 2013); a total change five times bigger difference between the two areas prior to 2010. Running a Student’s t test comparing mean home prices on a year-by-year basis, it was observed that the difference in mean home values between the two neighborhoods was not statistically significant until 2010, from which point it became consistently significant (p<<0.001) (fig. 6). These findings suggest that the rise of new businesses in Old North Durham have correlated with a buoying of property values in the surrounding area, while a similar area in Durham has experienced a statistically significant fall in residential property values.

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Figure 4

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Figure 5

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Figure 6

In order to get a fuller idea of how the relationship between house prices in the area have changed, I ran a total of sixteen linear regressions of house prices versus home size, lot size, and home age in each area over the years investigated. These regressions gave me a measure of how much house price depends on these parameters. My findings are summarized in Figure 7.  From the first graph we observe a substantial marginal change in home value in Old North Durham with square footage. While the result in 2009 appears to be an outlier, all other years show a difference between the price dependence on square footage between the two areas that has been stable up to 2009 and then diverging since then (with only a small change in Jan 2013).  The divergence we see since 2009 shows that the new developments in Old North Durham have increased the gap between the willingness of people to pay more for extra square footage in between these two neighborhoods. The graph also illustrated that this divergence is not due to a significant increase in the customers’ willingness to pay for additional sq. ft. of a house around the Motorco Area as much as a decline in their willingness to pay for the same sq. footage in the control area. This is consistent with what we saw in Figures 4 and 5.

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Figure 7

The second graph on figure 7 shows the marginal change of house prices with lot square footage. This does not represent a strong or clear relationship in these areas, either within each neighborhood over time, nor between them. One way to interpret this is the possibility that residents’ decision to buy a house in a poorer and worse neighborhood may not be influenced by the lot size as much as the ones in nicer neighborhoods. However, the small correlation between lot size and home value supports the idea that lot size does not really influence a residential property’s price in a city like Durham where land is abundant.

When looking at the third graph on figure 7, one must note that this the regression is performed on year built rather than on age, which means that the graph shows the relative change in home value for each additional year you add to a home’s age. Interpreting the relationship we see that on average older houses in the Motorco, or Old North Durham, area cost more than older houses in the control group. This is an interesting observation that could mean that there are more renovations in Old North Durham, while more renovations mean that the area has been taking a turn for the better since the new businesses came in.

There is more evidence that Old North Durham has begun to transform in the recent years. From my interview with Fullsteam’s owner I learned that he has noticed his clientele becoming more diverse though the years, and that a lot more students are comfortable stopping by than before. This is evidence that Old North Durham has improved in terms of safety and could be attributed to the opening of the new businesses—not only the new bars and restaurants, but also the food trucks, which are now stopping by regularly, make the area around Old North Durham a lot more vibrant than it used to be. The increased attention to this part of town is also evident from a dispute over a nearby area that is currently used as a soccer field. The disagreement comes from the fact there seems to be a conflict of interests between the members of the community over the use of the land after a proposed renovation.  Some residents are using this area to practice soccer and claim Durham does not have enough soccer fields based on national standards. However, others believe that the area should host a smaller soccer field and some playgrounds. “The park has been included in two Capital Improvements Plans, first in 2001 and again in 2005, but the city has not funded any upgrades there, saying money was better spent in other parks.”[5] The increased attention towards the soccer field debate today supports the idea that the area has began to take a turn for the better and could even suggest that gentrification is occurring.

The outcomes of this analysis provide strong evidence towards the positive effect of the new businesses in Old North Durham. The area’s house prices show stable growth in the past eight years, while a similar area such as East Durham/Edgemont has suffered a decline in house prices. This comes to show that risky investments in bad neighborhoods could pay dividends for residents as well as local business owners. The information in this analysis can be used as an example of how strategic reclamation of industrial spaces can prove an economic boon through enticement of the “alternative lifestyle” market. Basing its actions on the positive changes Old North Durham, the local governments may be able to stimulate the revival of other areas in Durham (as well as other cities with a ample vacant industrial space) by creating incentives for entrepreneurs to develop such spaces.

 


[1] Holloway, Carson. Personal Interview. 28 03 2013.

[2] Wilson, Sean. Personal Interview. 25 03 2013.

[3] Barrera de Grodski, Leon. Personal Interview. 23 03 2013.

[4] Holloway, Carson. Personal Interview. 25 03 2013.

[5] Schwartz, Joe. “Bad blood brewing over Old North Durham Park.” Indyweek.com. N.p., 13 4 2011. Web. 6 Apr 2013. <http://www.indyweek.com/indyweek/bad-blood-brewing-over-old-north-durham-park/Content?oid=2361969>.


1 Comment

  1. Excellent paper overall. I think that there were some interesting and valuable econometric moves here, that could also lead to further study. In particular, your selection of a control area and assertion that lot size are not important are the most interesting.

    First, as a selection of a control area, East Durham is an interesting choice. It is about as far from the CBD as is North Durham, and the shared industrial heritage makes them a worthwhile comparison. However, there are two interesting aspects of East Durham that merit further consideration. One of these is that East Durham still has active industry. Though it is primarily on the borders of the area, there is nonetheless a still-functioning industrial base. This is especially true with the southern and eastern parts, where there are several aggregate industries. Another thing worth pointing out is that, as you said, it is a more economically depressed area. Though your assertion (which may very well be correct) that this doesn’t matter seems reasonable to me, it might be something worth looking into further. Specifically, I wonder if a sort of tipping phenomenon was occurring–as you point out, prices decline in East Durham. Perhaps this is a result of the fact that the area was already economically depressed, and people left the area as soon as they had the means. Of course, having said all this, I think you made the right choice in your selection of a control area. No other area of Durham is similarly industrialized, and as close to the CBD. Most other districts are primarily residential, and have been severely gentrified. The only other thing I could think of would have to be Hillsborough Rd.

    With regards to your assertion about lot size, it seems quite reasonable at first. Looking at the google maps imagery, it was clear that there are huge amounts of green space available. As you say, space is not at a premium and therefore probably does not have a massive impact on prices. I think that’s probably true, based on the econometric models from class (their names escape me now). There are a few massively forested areas right in the middle of the development. At the same time, I have to wonder if they in fact had NO effect. It seems to me like lot sizes must have accounted for some part of the price change, though I think it would have to be small. This is just one extra–and I agree non-critical–variable that might be included in your regression.

    Also, I was curious if you looked at local amenities as well. North Durham has quite a few, while I’m not sure that East Durham has as many (the career and resource center is a big exception). Given that various models (Tiebout?) seem to imply that amenities are important in how people decide to locate (and thus what price they pay), would it be worth looking at some of the amenities? It’s hard to quantify them, but one suggestion would be to add up the number of schools, parks, and anything else you consider amenities, per square unit of measurement for the years that you study. Also worth looking at would be bus access.

    One of the things I liked about the article is that you identified buildings in East Durham that could have served as locations for Motorco, but were already occupied. I think this was an important step in making sure that the control area was suitably similar. I also think your econometric technique was spot on and you did an excellent job of proving your hypothesis. In the end, expanding this study to other parts of Durham would probably be very worthwhile.

    An excellent paper!

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