English
Delineation and Valuation of Residential Neighborhood Boundaries.
The residential neighborhood is a specific geographical❓❓ area characterized by shared characteristics that distinguish it from surrounding areas. These characteristics can be natural (e.g., a river or hill), artificial (e.g., highways or railways), or socioeconomic (e.g., income level or demographics).
A residential neighborhood is a relatively homogeneous geographic and social unit where property values are affected by similar factors.
The process of defining the boundaries of a residential neighborhood depends on several factors, and a combination of these factors can be used to reach an accurate definition:
- Natural boundaries: Include water bodies (rivers, lakes, streams) and topography (hills, valleys). These boundaries are often clear and separate different neighborhoods.
- Artificial boundaries: Include highways, railways, walls, or any infrastructure that separates different areas. These boundaries often affect accessibility, noise, and pollution, thus affecting property values.
- Legal and administrative boundaries: Include the boundaries of administrative divisions (such as districts or regions), zoning❓ boundaries, and school district boundaries. These boundaries are important because they define available public services (schools, health centers, municipal services) and affect the permitted uses of land.
- Socioeconomic characteristics: Include demographics (age, income, education), lifestyles, social level, and local commercial activities. These characteristics reflect the identity of the neighborhood and affect its attractiveness to residents.
Defining the boundaries accurately has great importance in the real estate appraisal process:
- Data scope definition: The boundaries define the area for which data is collected, such as sales prices, rental rates, and demographic characteristics.
- Selecting comparable properties: The boundaries define the area in which to search for comparable properties to assess the property to be valued.
- Market analysis: The boundaries define the area in which real estate market trends are analyzed, such as supply and demand, sales prices, and marketing period.
- Impact on value: Understanding the unique characteristics of the neighborhood allows the appraiser to determine the factors that affect the value of properties within it and whether the neighborhood is in a phase of growth, stability, or deterioration.
Factors affecting property values include:
- Economic factors:
- Income level: The average❓ income of families in the neighborhood affects purchasing power and thus property prices.
- Unemployment rate: A high unemployment rate can lead to a decrease in demand for properties.
- Economic growth: Economic growth in the surrounding area can increase demand for properties in the neighborhood.
- Social factors:
- Demographics: The age, ethnic, and educational composition of the population affects the quality of life and services required.
- Crime level: A high crime rate can lead to a decrease in property values.
- School quality: The presence of high-quality schools increases the attractiveness of the neighborhood to families and thus increases property values.
- Physical factors:
- Infrastructure quality: The quality of roads, water, sanitation, electricity, and communications affects the quality of life and property values.
- Green spaces: The presence of parks and green spaces increases the attractiveness of the neighborhood.
- Noise and pollution levels: High levels of noise and pollution can lead to a decrease in property values.
- Governmental factors:
- Zoning: Determines the types of uses allowed for land (residential, commercial, industrial) and affects property values.
- Property taxes: High property taxes can reduce the attractiveness of the neighborhood.
- Public services: The quality of public services (security, health, education, cleanliness) affects the attractiveness of the neighborhood.
Tools available for neighborhood analysis:
- Geographic Information Systems (GIS): Allow the display and analysis of spatial data, such as neighborhood boundaries, land uses, and demographic characteristics.
- Real estate databases: Provide information on sales prices, rental rates, and property characteristics.
- Population census data: Provides information on demographics, income level, education, and employment.
- Real estate market reports: Provide analyses of market trends, supply and demand, and marketing period.
- Field interviews: Interviews can be conducted with local residents and government officials to obtain direct information about the neighborhood.
Examples:
- School district impact: Two adjacent neighborhoods may be similar in all aspects, but one falls within a distinguished school district. This simple difference can lead to a significant increase in property prices in the neighborhood within the distinguished school district.
- Proximity to amenities impact: A neighborhood located near vital facilities (hospitals, commercial centers, metro stations) may be more attractive and have higher property values than a similar neighborhood located further away.
- Urban renewal impact: An urban renewal program can improve infrastructure and public facilities in a particular neighborhood, thereby increasing its attractiveness and raising property values.
Legal and ethical considerations:
- discrimination❓: The use of race or ethnic origin as a factor in neighborhood analysis or property valuation should be avoided. Racial discrimination in housing is illegal and unethical.
- Transparency: The appraiser must be transparent in defining the boundaries of the neighborhood and analyzing the factors affecting its value, and provide clear and logical explanations for their findings.
- Integrity: The appraiser must be honest and objective in valuing properties and avoid any conflicts of interest.
Formulas:
- Housing Affordability Index (HAI): HAI = (Average Family Income / Average Home Price) * 100. An HAI higher than 100 indicates that housing is affordable, while an HAI less than 100 indicates that housing is unaffordable.
- Real Estate Turnover Rate (RTR): RTR = (Number of Properties Sold During a Specific Period / Total Number of Properties in the Neighborhood) * 100. A high RTR indicates an active market, while a low RTR indicates a stagnant market.
Chapter Summary
- Defining neighborhood boundaries❓ goes beyond superficial similarities or physical barriers. It relies on understanding factors affecting property values within a specific area. These factors include: Physical barriers (highways, railways, waterways), zoning❓ differences, school district boundaries, political❓ divisions, and subdivisions.
- Neighborhood data is important for identify❓ing the potential market for a property and comparing its attractiveness to properties in competing neighborhoods. It is also used to identify similar neighborhoods when comparable properties outside the subject neighborhood are needed, adjusting their values to reflect neighborhood differences.
- The Uniform Residential Appraisal Report (URAR) is used in neighborhood assessment, focusing on: Location (urban, suburban, rural), density, growth rate (rapid, stable, slow), property values (increasing, stable, decreasing), supply and demand (shortage, balance, decline), marketing time, price and age range (including average❓ price and age), and land use percentages.
- Change is a fundamental aspect of valuation theory. Appraisers must study and analyze the impact of change within a neighborhood on property value.
- Neighborhood data sources are the same as regional and community data sources.
Conclusions:
* Defining neighborhood boundaries is a complex process requiring in-depth analysis of factors influencing property values.
* Neighborhood data is essential for accurate property valuation and market identification.
* Appraisers must be aware of neighborhood changes and their impact on property values.
