Economic Perspective: Location, Location, Location

MARY WALDEN:

“Today’s program looks at location, location, location. Mike, it’s often said those three words are the top three factors in real estate. Give us the background of their importance.”

MIKE WALDEN:

“Well, people know you and I like to look at houses, and we like to watch real estate shows, and one of the phrases that you often hear from people that are looking to buy a house, they’ll say to the agent, ‘If only we could take this house and move it closer to jobs, and schools, and businesses. Then we’d buy it.’ Well you can’t do that, number one, and if you did do that the house is going to cost a lot more.”

“When you buy a house it’s not only the size of the house, number of bedrooms, number of bathrooms, et cetera. It’s where it is, and houses that are closer to things that people want to be close to – again jobs, schools, businesses – are going to cost more. And the interesting thing about this is that recent research shows that in this century, since 2000, the price, the extra price that people will pay for being closer to those amenities has actually gone up. In fact it’s gone up 20 percent more.”

“So this is a real hard decision that people have to make when they’re looking to buy a house, or they’re looking to buy a house that maybe has the size they want but it’s farther out, or do they perhaps want to buy a smaller house that’d be closer in. That’s the real challenge in real estate.”

Mike Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in
the Department of Agricultural and Resource Economics at North Carolina State University who
teaches and writes on personal finance, economic outlook and public policy.