Lenders also seldom take into account a city or town's financial health when reviewing mortgage applications.
"There is really no review of a municipality. We're more concerned about the specific property and surrounding property values," explained Gay Greene, senior vice president for loan originations at Sibley Mortgage Corp. in Rochester, N.Y.
She says a lender's appraisal will sometimes take into account economic conditions, although it's impossible to predict their long-term effect on property values. "It could play a role at some point in time. . . . If there are major problems, property values go down," she said.
Financial problems--from budget shortfalls to business failures, even government fraud--can adversely impact a community's quality of life, and that in turn, could indirectly affect home values.