The Four Impacting Forces on Real Estate Value

Real Estate Broker/Owner with Avion Realty

If you have been dabbling in real estate for a while, there is no doubt that you have probably heard of the

four forces impacting property values. Academics have isolated these factors since all influences can be classified into one of the four categories. The factors are as follows:

Social Forces
Social forces relate to our social trends and culture as a whole. Specifically, instances such as the number of elderly folks in a town, can cause an increase in demand for more retirement communities, Due to the internet revolution, the demand for office space has decreased as most internet entrepreneurs use a home office to run their operations. The crime rate adversely affects values in a community, as does growth or decline in the local population.

Economic Forces
These factors relate to the economy of the state or region. Interest rates, employee wages, and the availability of financing, drive the demand to live in an area up or down. The supply of land in a particular area also affects the value of houses in a community as does the availability of certain utility services such as high speed internet.

Physical/ Environmental Forces
It is clear that a properties value is reflective of what a willing buying is willing to pay and a willing seller is willing to sell their property for. Buyers are not willing to pay the same for a property in fair physical condition when they can have the property down the street in good condition for the same price. You also wouldn't pay the same for a property located near a junkyard or dump if you can buy a property on the other side of town at the same price. Amenities are also considered to be environmental forces such as the location of the nearest transportation, proximity to a shopping mall, etc...

Governmental/ Political Forces
One of the first questions potential buyers ask me when considering a property is what the property taxes are? Both state income taxes and property taxes affect the value of real estate as do the quality of the local schools, police protection, fire protection and the availability of health care. Zoning is another Governmental/Political Force since a change in use can de-value a property very quickly.

It is important that you understand these factors and incorporate them into your value decisions as well as using them in the decision of choosing your target area. You want an area where the average person could live and would want to live. This decision will determine how quickly the real estate problem you have taken on is solved or how quicky it turns into your problem.

Comments (2)

Armando Rodriguez
Orlando Homes 4 Sale, Real Estate Broker-GRI

Very informative blog.

I tend to agree with your opinions..

Thanks for the post.

Aug 03, 2007 01:33 PM

I just wanted to let you know how much your blog on the 4 forces has helped. Because it has. IMMENSELY. 


Feb 15, 2012 07:24 AM