My Hattiesburg

Factors of the Market

October 27, 2005 on 11:35 am | In General Real Estate |

Before someone decides to buy or sale a home it would be advantageous to have knowledge on how the housing market works. In this post I will be discussing the economical characteristics of real estate. So lets begin.

Economical Characteristic #1: Scarcity
We may not often think that land itself is a rare commodity, but only 25% of the earth’s surface is dry land. The supply of land is not limitless; so the amount of land in a certain area is considered to be finite. Generally, the more scarce land is in a region the more valuable it is. So you see how scarcity plays a factor in how people set prices for real estate.

Economical Characteristic #2: Improvements
Improvement in real estate terms is defined as any artificial thing attached to the land. Building improvements on one parcel of land may effect the price of the land around that parcel. For example, building a new shopping center in a area may cause the price of the real estate in that area to go up but on the other hand building a nuclear power plant in the same area may make the price of real estate to decline.

Economical Characteristic #3: Permanence of Investment
The capital and labor used to build an improvement represents some degree of fixed investment. Whether the improvements are building a new structure or adding drainage, electricity, water, and sewer these improvements are considered long term investments and maybe reflected the price of the real estate.

Economical Characteristic #4: Location
You may think of location in terms of only geography. However, the type of location we are interested in is sometimes refered to as Area of Preference. Area of preference refers to the preferences for one area over another. This preference may be based on such factors as history, reputation, convenience, scenic beauty, and simple geography. It is the unique qualities in preference that make some similar properties retain very different prices. Location is the most important of the 4 Economical Characteristics of real estate.

So before you buy or sale a home you may want to analyze the area you live in using these four Economical Characteristics.