Understanding Home Appreciation and the Effects it has on Real Estate

What is home appreciation and why is it important?

Home appreciation is when your home value increases over any period of time. When you determine the potential profit of selling a piece of real estate, appreciation is a key factor to take into consideration. 

What Affects Home Appreciation?

Location:

If the location of the property is in a highly desirable area, the more likely your property is to go up in value. If you are in a “low” crime area or location with more businesses, then you would likely see an increase in home appreciation. 

Market Conditions:

You often hear clients ask their agents what the market looks like. This is due to interest rates, and supply and demand.

 When the demand for homes go up, but the supply on homes selling is low, this is called a “Seller’s market”. In a typical sellers market, appreciation on homes tend to go up. When the supply on homes for sale is high, and the demand high, this is called a “Buyer’s Market”. In a buyer’s market, the opposite happens, homes may not appreciate as quickly, or even depreciate. 

Interest rates are consistently changing everyday. Lower mortgage rates typically make it cheaper to buy. This in turns means, the demand on homes increase lead to home appreciation. When mortgage rates rise, demand decreases which then slows down appreciation. 

Economics:

When there is a rise in jobs and higher paid wages in an area, that location will become highly desirable to work in, and in turn, to live in. Home values also rise when inflation of cost of building goes up

Housing Trends:

Certain home trends also affect home appreciation. Trends include, but are not limited to, the house size, housing type (single-family, multi-family, etc.), specific features of a home (office, bonus room, pools, etc), curb appeal, age of home, etc. There are so many features of homes that can allow for your home appreciation to increase.

Final Thoughts

Home appreciation typically stems from a mix of broader economic factors, local market conditions, and the unique features of a property itself. While there are calculators available to help figure out the cost of your home, the most accurate way to determine your home’s value is by having an appraiser assess your property. 

Always be sure to get with your real estate agent regarding any questions you may have. If you do not have a realtor, do not hesitate to reach out to us, and we can share some of our contacts with you!