by Francis Jock

Created on: May 16, 2009   Last Updated: March 03, 2010

How important is area and location when it comes to buying real estate? The answer to this question is obvious and yet not quite understood. The most direct answer is that location establishes the underlying property value of a home. Meaning that of all the important factors that influence the selling price, location weighs in as the most important factor.

Unlike a business's location, however, the market value of a home isn't necessarily a function of convenience and presence. It's more a function of lifestyle, buyer's expectations, and resale value, all of which are the glue that holds neighborhoods and communities together. A prime real estate location attracts wealthy and affluent home buyers because they can afford the quality of life that comes with living among people with comparable economic status. On the other hand, Rural, suburban and low-income housing generally attracts those with less affluence, although there are some that will live in these areas by choice.

Location determines, among many other things, such selling factors as how long a home will be for sale in the current real estate market, the price range of the home and comparable homes within the area, and the quality, or affluence of homes and homeowners in the neighborhood and surrounding area. Obviously, choosing the right location to raise a family is a matter of social class and prestige, which often comes as a trade-off with family financial resources.

From a broad view point, a home's market value is only slightly affected by its geographic location and more affected by its metropolitan location. Broad factors such as being located in the Pacific Northwest, the Gulf Coast, the South West, etc., will certainly affect a home's value, especially during recessionary or inflationary times, yet the metropolitan area will influence the value far more. Homes located in suburban bedroom communities that support employment in large industries such as aerospace, technology, manufacturing and the government-military-industrial complex are likely to experience relatively stable or rising market value. Of course, prolonged periods of economic downturn, such as the current recession, are an exception to this principle.

An unexpected downturn in economic activity or recession in any location will force market value downward. These trends are usually accompanied by rising unemployment, crime rates, foreclosures, business failures, declining government services and periods of social unrest. Some locations

• 1
• 2
• Next Page >>