The Six Big Things that Affect Home Prices: Knowing What Makes Them Go Up or Down
Thinking that the price of a home is calculated by its size in square footage and the number of bedrooms is an entirely wrong turn. The home’s sale price is much more than that; it is a massive puzzle of pieces, each representing a unique factor that can contribute to the home’s value. Understanding this benefits buyers and sellers because they need to make informed decisions and succeed in the process.
This text will cover the six critical factors that affect home prices and cause them to vary. You will understand why, for example, two seemingly identical houses can have quite different prices. Let’s start.
1. The Location of the Home
The most crucial factor that influences the home price is undoubtedly the location. This doesn’t refer to a geographical location but also to the final details of the home’s neighborhood and facilities.
Yes, geographical location matters a lot because it’s pretty different to buy a home in a metropolitan city center than in the suburbs. The trends, say in California will be quite different from the trends in New York. On the other hand, if the location is a famous tourist destination, the home price will be much higher.
Moreover, a good neighborhood can increase home values, whereas a bad one will have the opposite effect. To distinguish between a good and bad neighborhood, you need to look at things like safety, infrastructure, tax rates, school districts, weather, and average income.
The price of a home near shopping centers, grocery stores, entertainment venues, etc., will be higher. However, if it is located in a rural area, it might be more affordable.
2. Characteristics of the Home
The next thing that can increase or diminish the home’s value and price is the home’s characteristics. This includes the number of bedrooms and bathrooms and overall square footage. It is not a lie to say that the first thing people consider when searching for a home is the size and the layout. Usually, when the search starts online, people immediately filter out homes that don’t make their list of wanted characteristics like the number of bedrooms and bathrooms.
However, apart from the size, some other factors and characteristics influence its value and thus increase or decrease the price. These include the age, the quality of building materials, and the appliances’ energy efficiency. Sometimes, they cost more upfront, especially with energy-efficient features. Still, the buyers know that a higher monthly payment will be more affordable in the long run than a low monthly mortgage with high utility bills.
If the home is old, it will need a lot of repairs and renovations to increase the value of the home, so even though the home price is lower at the beginning, you would have to consider the future and all the costs that the renovation projects will bring.
4. Market Conditions at the Moment of Buying
The third big thing that influences the price of a home is the market conditions at the moment of buying. They are ever-changing and definitely huge factors that can influence the property’s worth, so keeping a close eye on the trends and the way they change is very important.
For example, when interest rates are high, buyers don’t make that final purchasing decision. As a result of this decrease in demand, prices go down. When the opposite situation occurs, meaning when interest rates are low, the increase in the month drives prices up.
On the other hand, when the economy is thriving, house prices increase as well. But if unemployment rates begin to increase, then the desire to spend on houses drops.
5. Local Price Trends in the Neighborhood
Apart from closely watching market conditions in the real estate industry, you should also look at the sales price trends within the neighborhood. This means you need to compare the values of similar properties in the area to see how much the home price would be for that given property. If houses in the neighborhood start selling for higher prices, all homes will appreciate. However, if some sellers decide to sell their houses quickly below market value, other home values will also feel the drop.
6. Appraisals and Inspections
These are two factors that influence a home’s price later in the negotiation phase because the appraisal and inspection come after the initial decision to buy a house. They will set the tone for the ultimate sale price of the home because if the home has some issues or failures that need to be addressed, the price will go down. However, if the appraisal value exceeds the listing price, it will increase it possibly by thousands of dollars.
Yet, these are out of the seller’s control because appraisals and inspections are done by professionals who thoroughly inspect the home and write a report on everything that needs to be addressed.
7. The Season
Last but not least, the season or the time of the year dramatically influences a home’s price. For example, the demand for buying a home is at its peak during spring and summer, while winter is not that popular. Seasonality is influenced by several things. If families want to buy a home, the best time to move would be over the summer when kids are not attending school.
Conclusion
Several factors can determine the home value, thus shifting the selling price. Among the most important things that influence the home’s price are the location, its characteristics, market conditions, trends within the neighborhood, appraisals and inspections, and the time of the year. If a buyer and a seller thoroughly understand these factors and use them to their advantage, both will have a successful estate endeavor.