While there is seldom control in the housing market — interest rates, economy, government policies, demand, etc. etc. — there are a few ways you can positively influence and predict your home's value.
Here are 8 property price drivers to evaluate before placing your home on the market.
1. Neighborhood Comps
One of the best indicators of your home's value is the sale price of comparable homes (comps) in your neighborhood. The best ways to find comps in your area — for commercial and for residential properties — is through home appraisals and comparative market analyses done by an agent.
Advice for navigating the comps search:
- Look for homes that were recently sold.
- Look at homes that are most similar to yours in terms of home features like year built, number of beds and baths, square footage, and type of home (duplex vs. ranch).
- Look at home in the same subdivision as yours with the same HOA rules, school district, etc.
Ideal location of your home is not as subjective as you think. When appraisers are evaluating the value of your home, they are looking at 3 primary location indicators:
- The quality of local schools
- Employment opportunities
- Proximity to recreational fun: shopping, entertainment, restaurants, and fitness centers
These three factors are the reason why some neighborhoods have steeper prices than others that are only a few miles away.
3. Space and Size
When estimating your home's value, home size and space are important elements to consider. This number is usually expressed in price per square foot.
In addition to total square footage, usable space is what appeals to appraisers and buyers. Garages, attics, and unfinished basements are generally not counted in that square footage, so their value is not as great. Nice-to-haves, but not need-to-haves. Bedrooms and bathrooms are the big ticket items. The more beds and baths your home offers, the higher the home value and the higher the worth.
With that said, these trends are local specific and can vary across cities. For example, a covered, attached garage may be worth more to potential buyers in Minnesota than potential buyers in California.
4. Age and Condition
Homes that are newer tend to appraise at a higher value because of their newer critical parts: plumbing, electrical, roof, and appliances. Many buyers will pay more for a move-in ready home to avoid paying these costly replacement expenses. More often than not, you will see buyers with an inspection contingency in their contract, meaning any home maintenance or repairs that come up during the sale of your home will negatively impact your home's value and take-home profit (pun intended).
So, know what needs to get fixed / replaced before placing your home on the market.
5. Upgrades and Updates
Upgrades and updates can add value to your home, especially to older homes with outdated features. However, some upgrades and updates won't always add to your home's value, so proceed with caution.
It all depends on the market you are in. Some projects like adding a pool or full bathroom add value to more expensive homes, while projects like a finished basement or kitchen remodel add more value to less expensive homes. Luckily there are home improvement calculators out there that help you find out which improvements will add to your home's value.
6. The Local Market
Even if every property price driver up until this point has positioned your home's value in a good spot, that could mean nothing if the local housing market is working against you. The number of buyers and the number of sellers in the area will affect your home's value at sale time.
A lot of buyers competing for fewer homes makes it a seller's market. Fewer buyers competing for a lot of homes makes it a buyer's market.
In a seller's market, homes tend to sell quickly and usually at or above asking price. In a buyer's market, you will have to prepare for price negotiations, a longer timeline, and contingencies in the contract. For example, you might have to cover repairs or closing costs in order to attract more buyers.
7. Economic Indicators
The broader economy can have a major impact on your home's value. In slower economic conditions, the housing market can flounder. Economic indicators to be on the lookout for when deciding to sell your home is employment figures, price of crude oil, consumer spending, GDP, inflation, and current status of home sales and appreciation in your area.
8. Interest Rates
Speaking of economic indicators...
Both short-term interest rates (what you pay on credit cards) and long-term interest rates (what you pay on residential and commercial loans) influence your home's value. A rise in Federal Funds' short-term rates may increase your savings, but it will also increase your short-term debt. A rise in long-term rates will affect your mortgage options and the rate you receive on a 30-year, fixed rate loan. The latter can be less predictable due to the many factors that influence it (i.e. Department of Treasury yields, investor sentiment, inflation rates, etc.).
In conclusion, as both short-term and long-term interest rates increase, fewer people may be able to afford buying your home.
Wondering if now is the time to buy or sell? We have a team of experienced lenders ready to help you evaluate your home's value and curate a financing option tailored to you.