Important Variables that Influence the Value of a Home<\/h1>\n

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To determine how much profit a property sale can make, one must look at the factors that would cause property value to increase. Bloomberg tries to emphasize that recent supply and demand of homes being purchased is largely responsible for today\u2019s property values but there are many other factors that contribute to this value as well. So if you want to know what these said factors are then this blog is for you.\u00a0<\/span><\/p>\n

For today\u2019s blog, exclusive for our Core members, we will be talking about the different important variables that influence the value of a home. The increase of a property\u2019s value is called \u201dappreciation\u201d. Appreciation stems from a series of factors that influence one another, ultimately driving the price of the home up. So now, we will discuss the factors that cause property values to increase over time and how to obtain a home value estimate.<\/span><\/p>\n

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Firstly, you must understand that location is the most important part of home value. Homes don\u2019t actually appreciate in value, but the property they are located on does. What does this mean? The physical properties of a home tend to depreciate, whereas the location itself helps or hurts property values. For example, if you are in a close-knit neighborhood with an excellent school district, your property will likely be more appreciated than if you\u2019re not.\u00a0<\/span><\/p>\n

Historically, homes that are near urban locations with close proximity to employers, restaurants, shopping, and recreation hold more value than those in rural areas. Communities that take the initiative in improving their amenities by developing restaurants and parks have homes that increase in value over time. Community improvements that include the development of nature trails also boost home values. <\/span><\/p>\n

According to research, properties adjacent to naturalistic parks and open spaces have an 8 percent to 20 percent higher value when compared to comparable properties. The value found in the property decreases to near zero as the distance away from the park increases, with a half mile as the cutoff. An example would be Gilbert’s $425 million Capital Improvement Plan has resulted in a phenomenal increase in home values with the development of streets, parks, and water infrastructure. These developments led to new restaurants and other businesses in the area. With the current housing shortage, Gilbert is making headlines in Arizona. With a booming population and recent ranking as the 5th best place to be in the nation, this town is moving up in rankings quickly.<\/span><\/p>\n

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Urban home values have historically grown at a faster rate than rural, but lately, there has been an upward trend in rural home values. There are much more remote work and education options today, which has stimulated home buying in rural communities because of the increase in space. \u201cWe\u2019re seeing a big trend in people moving out of the city to [locations] that are an hour or more away. <\/span><\/p>\n

They\u2019re looking for a little space, a yard for the kids to play in, and more of a community feel. That\u2019s brought the demand and property values up for homes outside of the city in a way we\u2019ve not seen before. Prices outside the city are rising much faster right now than within the city,\u201d states Freeman, who works with over 68 percent more single family homes than the average agent in her Seattle market.<\/span><\/p>\n

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Low crime rates in a neighborhood tend to make homes of that community more valuable. This finding is supported by the idea that having a lot of younger people around brings more chances for crime, while an aging neighborhood means those youth are unlikely to be engaging in risky behavior.<\/span><\/p>\n

One out of four recent homebuyers were swayed by their children’s public school or private school when deciding on a neighborhood. Roughly 46 percent of people in their 30s took this into account, while 36 percent of those in their 20’s considered it as well. When a school district performs well, as deemed by grades given by the state and ratings by greatschools.org, buyer demand rises in neighborhoods nestled in that district\u2019s zone, driving property values up. Occasionally, the state or responsible body will redraw school zones which redistributes communities to new schools. These redrawn zones often result in a boost in property values as the new neighborhoods become more desirable for buyers.<\/span><\/p>\n

Homeowners with HOAs have a 5 to 6 percent higher property value than homeowners without those regulations. An HOA, in the modern sense, establishes a good quality of life for its inhabitants and also protects property values by regulating beauty and maintenance standards. When an HOA is added to an existing neighborhood, the home values climb in consequence.\u00a0<\/span><\/p>\n

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The more aesthetically pleasing and historical a home, the higher its value. The study by PlaceEconomics cites that in Raleigh North Carolina, homes are 49% more valuable when they are located near places of historic interest and 84%-111% more valuable if they are located in historic districts.<\/span><\/p>\n

What we’ve seen recently is that an inventory shortage leads to home values going up. In the housing market, when there are fewer homes to choose from, prices go up. Fewer sellers compared to buyers have led to a real estate inventory shortage. To make matters worse, the labor and building material has decreased due to the shortage of homes. As a result, many people are bidding on homes and high housing prices are becoming more common in America. With the scarce availability of homes, buyers are fighting over houses because of the high demand. As a result, prices are being driven to new highs.<\/span><\/p>\n

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As the sale prices of your comparable or similar existing properties in your neighborhood rise, the price of your home increases. Real estate comps are those that exist with similar size, age, features, and so on in your area. Comps are surveys of properties with similar features, which realtors and appraisers might use in determining a property’s value. When bidding wars in a certain neighborhood occur, the sale price is higher than previous prices of similar homes. Sellers can list their homes at a higher price and achieve a higher sale price if more bidding wars continue to happen. <\/span><\/p>\n

Victoria Lance, a top agent in Georgia, has experienced the domino effect called pushing the price point. Dominating summer 2020\u2019s hot seller\u2019s market, Lance reflects on her recent experience with this. \u201cI sold a house at $368,000, then the same floor plan ended up selling at $385,000. And I just went on a listing appointment last week, same floor plan, same community \u2014 it was on a side street which is a little more desirable \u2014 and I told them to list it at $400,000.\u201d In this example, if the first home listed at $368,000 would have been listed later, then it is possible that their property value would have increased and they could have sold for $390,000 or more due to comparative sales.<\/span><\/p>\n

According to Benson, the value of a house is affected by its usable square footage. The greater the usable square footage, the greater the home value in the eyes of appraisers and buyers. Unfinished space in your home, like foyers, backrooms, and walk-in closets, is not taken into account. Instead, appraisers apply a percentage to the amount of finished space that can be used as livable quarters. But don’t discount the spaces as value adds just yet! If you expand your home’s square footage with a home addition, finished attic, or basement, your property value improves to varying degrees. It especially benefits if the additional space can be used for a home office. <\/span><\/p>\n

\u201cHere in the Seattle area, nine out of 10 homebuyers are remote tech workers, working for Google, Amazon, Microsoft, and they\u2019re looking for homes with extra office space,\u201d says Freeman. Homes with ADUs or mother-in-law suite expansions have the potential to be more valuable by about 38 percent. Grant Freeman suggests that families are more likely to open up these spaces for their parents and adult children now in order to create a safe place after the pandemic. People can also reap the benefits of an additional income source.<\/span><\/p>\n

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Older homes generally have a lower resale value than newer homes. Home appraisers rate the condition of your home on repairs required and if the house is well maintained. A house with a sound foundation and structure, functional systems, and that is well maintained can also have a higher resale value. If you make sure to maintain your property and use newer, better materials in design, it will have a higher value. Buyers should take note of the age of the home so they can see when these models may have been implemented if they weren’t maintained correctly.<\/span><\/p>\n

Homes that have been updated with newer features and layouts will most likely be appraised at a higher value than similar homes. And if you\u2019re noticing that it seems similar homes are appraised for high values, the reason might be because the new remodel included modern features which attract more homebuyers. Some remodeling projects typically boost value and recoup project costs. One is landscaping.\u00a0 The lush landscaping around a home is worth 1 to 10 percent more than homes without landscaping. <\/span><\/p>\n

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Top agents in the industry believe that 75 percent of the time, with well-landscaped homes. Remodeling Magazine reported that remodeling a small kitchen can add up to $18,206 in resale value and recoup up to 77.6 percent of project costs. A new wood deck adds on average $10,355 in resale value. HomeLight’s Insight reveals that new stainless steel appliances add on average $5,982 in value and double ovens add an average of $2,414. Another way to increase your home\u2019s value is to improve any aging systems. Upgrading or repairing a system such as HVAC, installing energy-efficient windows, or installing a new garage door can increase efficiency and resale value. Updated fixtures and paint instantly update your home for a relatively small price tag.<\/span><\/p>\n

The zoning of a property is another variable that determines that property’s market value. Zoning is a method used by municipalities to regulate how property can be used within certain areas. Local zoning laws may include business, residential and industrial properties. Low-, medium- and high-density residential zones are just some of the examples. Restrictions in place to protect the value of the home, population, and job growth can lead to the need for more residential expansion. Zoning laws are modified to allow greater future development, which is called upzoning. Upzoning can have mixed results with benefits often debated. Studies have shown that upzoning can increase the home’s market value and potential for development.<\/span><\/p>\n

With falling interest rates and more people able to afford homes, the real estate market offers many potential homebuyers. Current homeowners who can afford to upgrade their homes also boost the number of possible buyers. The corresponding increase in demand for housing drives up the value of homes.<\/span><\/p>\n

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As a country\u2019s economy grows, home prices increase. This is because when employment rates have improved, more individuals will be able to afford to buy a house. When an economy is trending positively and people are confident about their financial situation, the number of home buyers entering the market will also increase, driving up prices. If home builders have to pay employees as much due to minimum wage, they will then pass this cost on to the home buyer, and this will increase the value of their property. <\/span><\/p>\n

But the economy doesn\u2019t just benefit from home ownership. When property values increase, homeowners see their wealth grow, which in turn encourages spending.\u00a0 When the economy is doing well, homeowners have money to spend on things like home maintenance and upgrades, as well as more cash flow for investments.<\/span><\/p>\n

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In a similar manner, politics and the economy frequently coincide. Government activities that either deliberately or inadvertently stimulate the economy and build trade can cause market values to rise. This includes legislative action and political climate. Governments create policies to boost demand, which benefits real estate. These include policies such as incentives for lower interest rates and for taxes. <\/span><\/p>\n

These policies lead to higher property values and demand. And confidence in a country\u2019s economic status is often correlated with the stability of its governing body. Roymartin, an Industrial Material Manufacturer, states that markets experience growth during election off years and decrease in value when that governing body has varying political ideologies.<\/span><\/p>\n

The value of properties nearby the disaster site increases after a tragedy. The decrease in supply and the increase in demand lead to a higher price for these unaffected properties. Homeowners in unaffected communities near a disaster area tend to see higher property values. While at first glance it doesn’t seem like this should be the case, homeowners are willing to pay higher insurance rates so they can continue living close to natural disasters.<\/span><\/p>\n

Natural and man-made disasters can lead to positive community development. After a disaster, sellers may make improvements to make their homes more attractive to buyers. For example, after a natural gas explosion in Massachusetts, sellers who replaced their natural gas appliances with electric units saw a jump in their home value.<\/span><\/p>\n