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Are my housing prices/taxes more influenced by the $40M beach house a few miles away from my home or those in the lower-class well beyond my county line?

Assuming a few basics:

  • there are differing economic classes
  • each lower one (ideally) graduates to the next higher one
  • we are, rather I am, somewhere at the upper-end of well-off
  • Area: SoCal, near the beach

class graduation

Full disclosure, this question is to satisfy a disagreement; in order not to taint the question, my side of the dispute will not be identified.

The 2 differing assertions are:

  1. my home prices are more affected by a fewer number of wealthy homeowners near my neighborhood.
  2. my home prices are more affected by a vastly greater number of poor/blue collar renters/homeowners nowhere near my home.

The supporting argument for assertion #2 is that those people at the lowest end of the spectrum are renting/buying in such great quantities that the supply is exhausted. Subsequently, all home prices, even those hundreds of miles away in higher-classes, are affected through a "ripple effect".

Extra kudos for those with more understandable answers. The final assumption, I'm not an economist.

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The closer things are to the property in question, the more they'll affect your property values. However, obviously there is a trade off between distance and amount of space. There will be some radius where the properties within that radius have the same affect on the value of your property as the properties outside that radius. What that radius is, is I'm sure widely variant and I have no idea how to figure that out.

But given the prevalence of neighborhood level disparity where a very rich neighborhood can exist next to a very poor one (West and East Palo Alto, CA come to mind), it seems like that radius is probably quite a bit smaller than a neighborhood.

So if I were to resolve your bet, I would say #1: the home prices are almost definitely more affected by the homes within your neighborhood.

Tho a neighborhood of homes is not super valuable on its own. It needs other amenities. Restaurants, barber shops, other businesses, utilities, parks, etc. All of these things confer a positive externality on the land.

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