One of the first steps in buying a home is learning how to recognize the signs of a bad neighborhood. A bad neighborhood, or one that's in decline, will limit the appreciation in the value of your home, increase your odds of becoming a crime victim, and affect your entire way of life.

Some signs of bad neighborhoods are obviously visible, while others are less so.

Visible signs of a bad neighborhood.

Obviously visible signs of a bad neighborhood include broken windows, vacant homes, graffiti, messy yards, abandoned cars, peeling paint, or other signs that the houses are not being maintained properly.

A less obvious but still visible signal is people walking in the neighborhood. Check out the area on a warm evening, or on the weekend. Are people out walking their dogs or walking with their children? If so, that means that the area likely has little crime.

Look around at the businesses in the area. Do you see vacant storefronts or office buildings? Do the businesses in the area look like they're doing well, or are they the types of businesses that gravitate towards low-rent areas? Retail business owners keep their fingers on the pulse of a neighborhood. If the successful business owners have moved elsewhere, perhaps you should consider a different area as well.

Pay attention to the number of police cars you see. Police departments assign their officers where they're most often needed. Unless the area you're looking at is very upscale, frequent police patrols mean that it's likely the area is more crime-prone than others.

Less visible signs of a bad neighborhood.

If the area you're looking at checks out for the points above, that doesn't mean that the area isn't prone to less visible problems.

One telltale sign of a deteriorating neighborhood is property values that are either stagnant or not keeping up with values in other parts of the city or county. Do a little library or online research for newspaper articles to see if homes in the area are appreciating at the same rate as homes in other parts of the city or county.

Ask residents of the neighborhood about which homes are owner-occupied, and which have absentee landlords. Absentee landlords don't always screen their tenants well, and bad tenants can ruin a neighborhood. Look around the area to see how many apartment buildings there are. Apartment dwellers are often transient, have little or no interest in a neighborhood, and can be sources of problems.

If possible, try to find out the number of police officers who live in the area. Police officers know where the criminals work, and they don't like to have their families live in those areas.

Many cities require police officers and other city employees to live within the city. Milwaukee, Wisconsin is one such city. The far southwestern part of Milwaukee has more police officers living there than in any other part of the city. That part of the city also has the lowest crime rate. That's no coincidence.

Consider the entire city or county.

When considering buying a home, look at population and business patterns. Is the population increasing or decreasing? If it's decreasing, where are people moving to and why?

Are major companies are moving into the city or county, or have they been leaving?

These two considerations--population change and business patterns--are excellent indicators of the area's future.

Even if residents are leaving to move to larger homes in the suburbs, and businesses are following to stay close to their employees, that still doesn't bode well for the future. When they leave, the city or county's tax base shrinks, resulting in cuts in services, increased unemployment, and more problems.

If residents and businesses are leaving, the area is facing trouble that you don't want to be a part of.

Resist buying on an "island."

Even if the neighborhood you're looking at seems fine, you should examine neighborhoods ten or twenty blocks away. It may well be that the neighborhood you're looking at is an island surrounded by bad neighborhoods. Sometimes these "islands" remain intact. More often than not, though, the island eventually is engulfed by the surrounding bad neighborhoods.

For most people, their home is their most valuable asset. Buying in a bad neighborhood puts that asset at risk. If you're limited financially, consider buying a smaller home in a better area. As the home appreciates, you'll have the equity to trade up to the home you always wanted.