What type of value does a homeowner use when determining the increase in their home value based on the neighborhood's worth?

The correct answer is that a homeowner uses value in use when determining the increase in their home value based on the neighborhood's worth. Value in use refers to how an asset is valued based on its utility or usefulness to a specific homeowner, taking into account personal circumstances, preference, and the surrounding environment, including neighborhood quality and desirability. Homeowners typically look at how their home fits into the broader context of their community and how neighborhood features—such as schools, parks, and overall market trends—can enhance the appeal and worth of their property on a personal level.

In contrast, market value refers to the price a property would sell for in an open market under normal conditions, which focuses more on external factors and comparable sales rather than the specific utility to the homeowner. Value in exchange deals with the amount paid in a transaction, and investment value refers to the worth of a property from the perspective of a particular investor, considering their specific investment goals and expectations. In this scenario, since the homeowner is determining value based on the neighborhood rather than strictly transactional or investment-focused criteria, value in use is the most applicable concept.