Knowing what influences home value is crucial, whether you're looking to sell, refinance, or are just curious about the value of your house. Many factors affect a home's value, some of which are in your control and others of which are determined by the state of the market as a whole. We'll dissect the main factors that affect your home's worth in the current real estate market in this post.
1. Location, Location, Location
This old saying is still relevant today. The location of a house is frequently the most crucial element in assessing its worth. A valuable location is influenced by the following factors: Being close to highly regarded institutions
- Low crime rates
- Availability of facilities include parks, dining options, retail establishments, and medical facilities
- Short commute to work locations
- Neighborhood or zip code desirability
Generally speaking, homes in upscale communities or in areas that are expanding economically fetch greater prices.
2. Condition and Age of the Property
Your home's worth is significantly impacted by its exterior and interior conditions. Homes that are well-maintained and have recently had their windows, plumbing, HVAC, and roofing updated are worth more than those that require extensive repairs.
In the same way, because they often require less upkeep and have modern systems and materials, newer homes typically fetch a higher appraisal than older ones.
3. Size and Usable Living Space
While square footage is vital, the way the space is used is just as crucial. A poorly built 2,500 square foot home may not be as valuable as a well-planned 2,000 square foot one. This is influenced by the following factors:
- Number of bedrooms and bathrooms
- Open floor plans
- Finished basements or attics
- Usable outdoor areas, such as patios and decks
- Remodeling kitchens
- Improvements to the bathroom
- Energy-saving appliances and windows
- Fresh paint or flooring
- Including a second bedroom or home office
5. Market Conditions
The market for real estate is ever-changing. Home values typically increase in a seller's market, where demand is high and inventory is low. When demand is low and inventory is strong, prices in a buyer's market typically decline or remain unchanged.
Home prices and buyer affordability are also impacted by mortgage interest rates. Generally speaking, lower rates increase demand, which raises prices.
6. Comparable Sales ("Comps")
For a home's value, appraisers and real estate agents frequently consider comparable home sales in your neighborhood. These "comps" take into account recently sold properties in the area that are comparable in size, age, condition, and location. Your home's appraisal may rise in a desirable community with expensive comparable properties.
7. Curb Appeal and Landscaping
First impressions count. Strong curb appeal properties—clean siding, well-kept lawns, and appealing entryways sell more quickly and for higher prices. The value of a home can be significantly impacted by even small landscaping efforts.
8. External Factors
Homeowners have no control over certain value aspects, like:
- Zoning modifications or a nearby new development
- Rezoning of school districts
- Environmental risks (flood zones, wildfires, etc.)
- Job growth and the local economy
- Inflation and interest rates
Homeowners can better time their sale or get ready for changes by being aware of these.
Final Thoughts
A number of factors, including market-driven, economic, and physical factors, affect home value. Although neither the location of your home nor the health of the economy can be changed, you may make better upgrades and schedule your real estate decisions more effectively if you know what factors affect value.
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References
National Association of Realtors. (2024). What factors influence a home's value? Retrieved from https://www.nar.realtor/research-and-statistics
Zillow. (2023). Understanding home value: What affects it and how to improve it. Retrieved from https://www.zillow.com/home-buying-guide/home-value
Bankrate. (2024). Lane, L. Factors that determine your home’s value. Retrieved from https://www.bankrate.com/real-estate/what-determines-home-value/
Redfin. (2024). How to increase the value of your home. Retrieved from https://www.redfin.com/blog/increase-home-value/
Investopedia. (2024). Kagan, J. What drives property value? Retrieved from https://www.investopedia.com/terms/p/property-value.asp