The five components of housing value

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This blog entry was updated with a new entry, "The eight components of housing value," in 2016.

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I am sure that there is plenty of research on this, but in terms of the last couple entries, I'd say that there are five separate components of housing value which when combined shape the price of houses in particular places.

This more careful consideration of the components of housing value gets at the issue of figuring out how to calculate the long term value of a house and the capacity for significant price appreciation, and being able to differentiate what shapes the difference in prices of houses that while located in different places, are seemingly very similar.

Or as commenter charlie said, "the difference between value and price."

1.  House value: comprised of the characteristics of the house matched with the household characteristics of buyers.

2.  Neighborhood place value: neighborhood characteristics including public safety, schools, civic assets, access to a neighborhood commercial district, the overall charm and quality of the built environment, neighborhood organization and community building, etc.

3.  Neighborhood location value: proximity to key activity centers and other assets, proximity to Downtown, etc.

4.  Neighborhood mobility value: access to and presence of transportation infrastructure including walking, biking, transit, parking, the road network, car sharing vehicles, etc.

5.  Community place value: the overall characteristics of a city/town/suburb including quality of governance, overall quality of schools, public safety, town centers, cultural and civic assets, community involvement, etc.

Note that the housing market is comprised of a wide variety of segments that have a wide variety of preferences when it comes to assessing places on these characteristics.  That's what leads to what is often called the "sorting effect" where people choose the place that best meets the greatest number of their preferences.

People who want to live in walkable neighborhoods move to walkable places.  People who prefer automobility choose places that are highly accommodating to motor vehicles.

The problems that arise come when people move to places that can't realistically accommodate certain of their preferences, especially on mobility.  E.g., it's difficult to live in the core and expect easy street parking.