The Four Forces of Value (2024)

While attending the University of Arizona in 1970, I attended a Real Estate Appraisal class where we learned about The Four Forces that Affect Value. Simply cited, they are: (1) Socio, (2) Economic, (3) Political, and (4) Physical elements.

Examples noted in the class and texts taught to the incoming appraisal community were:

Socio: The typical age of the homeowner in the neighborhood;

Economic: The typical annual earnings of the married couple in the area;

Political: The property’s zoned and legal use(s); and

Physical: The utilities that are available to the property.

Fast forward to 2021, and the same valuation elements have different meanings:

Socio: The percentage of the population in the immediate area that is vaccinated for Covid/today’s stats for the new Delta strain/the number of ER beds available in the closet hospital;

Economic: The projected inflation rate of 2022 due to the lack of construction materials/the dwindling supply of completed homesites for new housing due to the limited labor force;

Political: The effect of political unrest in certain communities on real estate supply/demand and pricing; and

Physical: The increase in ocean water levels in certain communities due to the growing risk of flooding waterfront properties, while lakeview properties have become less attractive due to the increased drought conditions in certain markets.

The 2021 scenario reminds me of the 1955 song written by Pete Seeger, but made famous by Bob Dylan: “Where have all the flowers gone? Oh, when will they ever learn?”

One of the economic Principles of Value taught in the 1970 classroom was The Principle of Change; that change is constant and will always occur.

But, as I age and become wiser, I think:

Never Write when you can Speak,

Never Speak when you can Nod,

Never Nod when you can Wink,

It is time to WINK!

What an interesting time to enter the real property valuation and consulting profession!