Why is location so important?
Your house needs to be in an area where there are excellent schools, where taxes are used to support great city services, where upkeep and maintenance of neighboring homes is excellent, and near your place of work. It is great to live in a walkable community, a place with a sense of belonging, security, and friendliness. It is important that there be very little crime, as this will greatly increase your home's value, and make it easier for you to sell your home in the long term.
What if your potential home is in an area with only one major industry or employer?
If this is the case, it means that if something were to happen to that industry or employer, it could become very difficult to sell your house, or even earn any appreciation on your investment.
What about buying houses in "up-and-coming" locations?
This really depends on your preference for risk and the amount of time you wish to wait for the house to appreciate. Some buyers prefer to find a great house in a changing location, where they feel the area is growing and desirable. In that case, they may realize a high return on their investment, even though it has more risk.
What about great deals on newly created subdivisions?
If you buy a house in a newly built subdivision, the builder could run out of money and not complete the project, leaving the initial buyers with houses in an incomplete area, making them very difficult to sell. Also, newly created subdivisions greatly change the available inventory of houses, making them much more difficult to sell in the short term.
What is another general rule about location?
Some people believe you should consider buying the worst house on the best block, since high home prices on the street may already demonstrate that it is a very valuable area in which to live. And with some hard work—and perhaps cash invested to improve it—the house will be far more valuable over time than buying "the best" house on the block, one that requires no work or additional changes but already commands a premium price, as there is less potential for appreciation.