The Real Deal / Defining Westport's 'transitional' neighborhoods

The "transitional neighborhood" is a phenomenon that has resulted from the teardown trend in Westport and other affluent communities across the country.

When buyers look at me quizzically after being told a house we're about to look at is in such a neighborhood, I give them the following definition: A transitional neighborhood is one in which older homes are being torn down to make way for new construction -- typically at two to three times the price of existing homes in the area.

By that definition, some would say the entire town of Westport is in transition.

But whether neighborhoods technically are in transition depends on the degree of contrast between the old and the new.

In the most obvious transitional neighborhoods, upscale new construction hulks over modest capes, ranches or splits. More subtle transition exists where not-at-all-shabby 1960s colonials are being replaced by $3 million-plus estates.

Real estate professionals tend to use four categories to describe transitional neighborhoods, based on percentage of old versus new.

"Early transition" means most of the original neighborhood is still intact.

"Moderate transition" means that newer homes have begun to change the look and feel of the neighborhood.

"Mostly transitioned" means original homes are in the minority.

"Fully transitioned" means that the combination of new construction, plus owner improvements to original dwellings, has changed the prior look and feel of the neighborhood.

Buyers react differently to transitional neighborhoods. Some are thrilled they can afford new construction and want to go forward because, having lived in Westport, they've seen other neighborhoods transform. Other buyers reject them in favor of more established locations -- even if it means buying an older house that needs work. Those not from around here may not feel comfortable buying in a transitional area because they're unfamiliar with the process.

However, everyone seems to agree there are pros and cons to buying in a transitional neighborhood. There are two major arguments in favor:

1. You get a new house that either doesn't exist or would be priced higher in a more established neighborhood.

2. When the neighborhood turns, you stand to benefit in terms of your home's value. That's because you took a chance on a transitional street and paid less than those who bought into the neighborhood later on.

And there are three major arguments against:

1. You have no guarantee that the street, in fact, will turn -- as well as no time frame for how long the transition will take. For every five streets that have transitioned lately in Westport, there are several on which transition has stalled. When considering an early transitional neighborhood, think about whether it seems likely to make the leap. Ask yourself: Is the street well located within town? Is there other new construction and/or more expensive homes nearby? Is your agent confident about the location or not?

2. It may take time to get your money out. Transitional neighborhoods are not a short-term investment. If the house you're considering is in an early transitional neighborhood -- and you don't expect to be there for at least five years -- it may not be your best option. However, if you are relocating to the area for just a few years, new construction in a transitional neighborhood may be your perfect choice if your employer will cover a financial shortfall associated with the neighborhood taking time to transition when you sell.

3. You may not like how the neighborhood looks -- or enjoy living through constant construction -- during the transition. This is more of an issue if you buy one of the first new houses in a changing neighborhood.

The bottom line regarding transitional neighborhoods is one of risk versus reward. In earlier transition, you'll pay less and assume some risk but have greater potential down the road. The later in transition, the less your risk but the more you will pay.

The great thing about Westport is that our housing stock has always been an eclectic mix of different sizes and styles -- of old and new -- all in the same neighborhood. From that perspective, transitional neighborhoods may not be such new news after all.

Evi Coghlan's "The Real Deal" appears every other Friday. She is a licensed real estate agent with the Riverside Avenue office of Coldwell Banker and a former marketing consultant to Fortune 100 companies. She may be reached at 203-247-6691, by emailing her at evi@evicoghlan.com, or visiting www.evicoghlan.com.