Economics and appraisal
Property value is most influenced by the neighborhood and community, and by the state of the real estate market.
The topics to be covered here include:
Understanding Communities and How They Grow
Real Estate Markets and Their Analysis
The Basic Value Influences
How Economic Trends Affect Real Estate
The Economic Principles of Valuation
In this section, we explain the concept of the neighborhood and show how to use neighborhood information.
Defining the Neighborhood
A neighborhood is a cluster of properties of similar land use and value.
It is a group of complementary land uses; a congruous grouping of inhabitants, buildings, or business
Boundaries of the Neighborhood
Neighborhood boundaries may be set by economic factors, physical features, or legal boundaries. Boundaries may
also be set by changes observed in the characteristics of the occupants, buildings, or land uses.
Typical features described for a residential neighborhood include:
Classified as urban, suburban, or rural.
Development and growth rate
The percentage of built up land. Growth rate may be described as rapid,
static, or slow.
Trend of property values
Whether increasing, stable, or declining.
Whether housing supply is short, in balance, or in oversupply compared with current
The average time needed to sell a reasonably priced property in the neighborhood.
Whether owner or tenant occupancy predominates. The approximate vacancy
percentage is described.
Single-family housing price and age
The range of housing prices, the predominant price, and the age-
range and typical age of homes.
Present land use %
The percentage of each land use in evidence.
Whether change is not likely, likely, or in process.
Sources of Neighborhood Data
Local Building and Planning Agencies
Chambers of Commerce
Real estate sales and property management agencies
Neighborhood demographic services are available on the Internet
Factors Affecting Neighborhood Quality
The major factors that affect the quality of any neighborhood can be grouped as physical, economic, social, and
political in nature.
Physical and Locational Factors