What characteristic of real estate indicates that prices are determined by local conditions?

The characteristic that most directly indicates that prices in real estate are determined by local conditions is the immobility of the commodity. Real estate is inherently fixed in place; properties cannot be relocated. This means that factors affecting local conditions, such as neighborhood demand, local amenities, school quality, and economic factors, have a direct impact on property values. Since properties cannot move to areas with higher demand or prices, their value is closely tied to the specific location and its characteristics. This immobility leads to variations in real estate prices even among similar properties, based solely on their geographical position.

Other aspects of the real estate market, such as supply and demand adjustments or the lack of a standard product, do influence pricing, but they do not emphasize the local nature of real estate prices as strongly as immobility does. The fixed location of properties reinforces the concept that the unique dynamics of a local market are what ultimately drive value in real estate.