Cluster Analysis is used for what purpose in property appraisal?

Cluster Analysis is a statistical method used in property appraisal to identify and group homogeneous areas. This technique focuses on analyzing similarities among different properties based on various characteristics, such as location, property type, age, and condition. By clustering similar properties together, appraisers can make informed comparisons and assess market behaviors within those groups.

Understanding the characteristics that create homogeneous areas allows appraisers to apply more accurate valuation models and better recognize the influences of local conditions on property values. This approach helps in identifying neighborhoods or sub-markets where properties share similar attributes, thus improving the reliability of comparisons and valuations.

In contrast, generating individual property values, analyzing market trends, and separating commercial from residential properties are activities that may use data from cluster analysis but are not the primary purpose of this specific technique.