Get up to4 free estimates
for ANY type of Contractor near you
- No Obligations
- Stop Paying Too Much For Your Contractor
- No Spam Calling
- Screened & ID Checked Contractors only!
As millennials age and move up the ranks in the workforce, more and more are beginning to purchase homes. And so marks another wave on the changing tide that is the real estate market, a financial ecosystem so saturated with elements of change that it is almost impossible to predict the worth of your home.
Regardless of the market, though, there are still some clear predictors of home value that are exclusive to the housing market. There are also some definitive steps you can take as a homeowner to add substantial value to your home.
These factors are only contingent on the state of the market in small part. Mostly, they are tried and true in their ability to drive listing price. In this way, the value of your home can be estimated on a sort of sliding scale that accounts for what your home has to offer, how marketable those things are, and finally, the supply of available homes versus the number of people looking to finally break those annual leases.
But pinpointing exactly what these key factors are or how certain amenities separate the highest priced homes from the rest of the pack is that easy. More difficult still is identifying the general components of your home from which you can derive a starting point or general range of value. The five points outlined will hopefully provide a new and clearer lens with which to view the often opaque world of real estate. Plus, there are plenty of other practical tips to ensure you’re getting the most out of your mortgage.
When identifying a starting point or baseline price range for your home, the best place to start is with sales history. This is especially true if you have bought your home recently, but the market has experienced a shift in the time since you have been living there.
One consideration to make as you peruse the sales price history is the difference from one sale to the next, all the way up to the most recent purchase if you are a prospective buyer, or the price you yourself if you are a current homeowner.
If you saw the price decrease, was this a repercussion of a failing market or was the market in those years of declining price solid? If the latter is true, then what about the house itself could be responsible for the decline? Perhaps some of the home’s major systems had been compromised during that time or had aged passed the life of marketability. For instance, roof life is said to be about twenty years. If the time in between two declining price points is five years or more, this could be the major factor at play.
The same goes for price increases. If the sales history shows a massive bump in price point and you are certain market health to not be the factor at play, perhaps some improvements were made to the home. If the increase was marginal, it is important to think about inflation. While it is only a mean and does not account for market health, you can fairly accurately calculate your home’s inflated cost based a rate of 2.33%.
The next of the elemental characteristics of a home responsible value is where that home is located. While out of your control, your home’s town or neighborhood is also less subject to change, and therefore a better forecaster of value.
Some things to pay attention to:
1. School system – How do the schools rank in your town? Better schools mean the town is a more desirable place to live, and thus the value of your home will be higher.
It is important to note that better schools could also mean higher taxes. The unintended consequence here could offset a value increase.
2. Crime rates – How does your town or neighborhood rank in terms of crime? Is it a safe community? What types are crimes are generally reported? Towns with low crime rates may report high occurrences of theft and burglary, which would negate minimal general crime.
3. Utilities – This is more neighborhood specific. Does your house have access to city water, city sewage, and natural gas hookups as opposed to well water, septic, and oil? The former are all more efficient, user-friendly, and thus desirable. In addition, some towns opt out of regional utility providers offering services like private electric grids which tend to be cheaper for residents.
4. Taxed Services – These are the things you are paying for when you write that check for property taxes a couple times a year. Think trash pickup, bulk removal, consistent road improvement projects, etc.
As with school systems, the better the services, the higher the taxes. This could be offsetting to home value.
5. Proximity – The value of your neighborhood can also be marked by something of a Goldilocks phenomenon. Is your home close enough to the highway to render morning commuting relatively easy, but far enough away so that you aren’t kept awake by tractor-trailer horns all night? Is your neighborhood residential and quiet, but also close enough to food and shopping? Having that just right location will play render your home extremely valuable.
One of the most constant elements of home value is size. Square footage is a very concrete predictor of home value and one that persists regardless of market health. But a big house isn’t the be all end all. Many homebuyers are also looking for layouts that do not limit their potential use of the space or their ability to get creative and customize to their liking.
Traditional, neutral layouts and color schemes demand more value because they are transferable. If you are thinking about selling your home in the next few years, it is a good idea to start deconstructing the customizations you have made over the years now so that you can present the home in a raw state. A buyer needs to be able to visualize what a home can be, however that serves their needs for space. That is difficult to do if space has been transformed over the years in a way that is extremely niche to your very specific use.
In addition to layout, there are some particular rooms that reign supreme in their ability to drive home value. If your bathrooms are relatively up to date, potential buyers will be given peace of mind knowing there will not be a much additional expense to that of the down payment.
Kitchen, however, is king. In a recent Consumer Report Survey of millennial homebuyers, a modern kitchen ranked at the top of the list of ideal home features. Some kitchen amenities that are especially desirable according to the survey are stainless steel appliances and quartz countertops. The state of this one room can often account for a 3-5% bump in the price of your home.
In addition to neutral layouts mentioned above, flexible living space has been identified as a top ranking trait of a valuable home. This means open floor plans and a maximization of square footage. For example, homes with finished basements or attics tend to sell at much higher price points than those without. This is because potential buyers, and especially young couples, view these rooms as flex-rooms, that could be used as offices or laundry rooms now, and nurseries or playroom later on, when kids come into the picture. These bonus spaces can produce a 4-6% increase in home price.
Millenial home buyers, in particular, are also looking for their new living spaces to be energy efficient. According to a 2015 National Association of Home Builders Survey, an energy efficient home ranked 2nd on factors most likely to influence a purchase decision. A safe community ranked 1st. Replacing windows with high-efficiency models and swapping out existing lighting for LED can bolster price up to 3%.
Along the lines of neutrality is the ease of living a space encourages. Once symbols of luxury, features like ornate finishes, decorative hardware, wall to wall carpeting, and aggregate surfaced counters are a thing of the past. This is mostly because they are difficult to maintain. Cosmetically, a home that is simple, practical, and classic is much more valuable. A key player in this easy, traditional look is hardwood flooring, accounting for 5% price increases in some cases.
Another fairly obvious determiner of home value is the age and condition of your home. Newer homes tend to sell at higher prices because the implication is that they are in better working shape. That nuance here is in historical homes that are well kept. These homes will have huge listing prices for the sentiment and modernization they bring to the table.
Elements that are specific to condition, and thus separate from amenities are those integral to structure like foundation, electrical systems, and plumbing. With electric and plumbing, it may be that in both cases yours are working just fine, but are not at current code. This has no bearing on their operability, but come inspection time, it will be an added cost to the homebuyer. Many real estate deal have fallen through because of these systems. Updating them, as well as HVAC, goes a long way. Roof life is also paramount, as mentioned earlier. Twenty years goes by quick, and a fifteen-year-old roof might seem like an inevitable burden to a prospective buyer. That value of these things speak for themselves with regards to home price, but they are not necessarily at low cost to you either. This is one of those scenarios where some cost to benefit analysis might reveal that it isn’t worth it to make those updates yourself if you are truly looking to sell.
Earlier, we talked about the market as the mysterious, shape-shifting, black magic force largely responsible for your home’s value, and while it isn’t necessarily within your control, it is of benefit to you as a homeowner and potential seller to have a basic understanding of how it works.
Essentially, the state of the market is a result of basic supply and demand. In good buyer market, there are few buyers and a lot of houses. In good seller markets, the opposite is true. In rare scenarios, there is a lack of both, as seen in the years following the financial collapse of 2008.
When this happens, houses end up in the possession of the lending banks. As the economy has begun to bounce back, and young people especially are beginning to purchase homes again, there is a surplus of foreclosed and pre-foreclosed homes available at price points far below their true value. It is a particularly difficult time, therefore, to accurately gauge home value. Despite this, it is a good thing for real estate that these homes are serving their intended purpose again, providing shelter and offering a space for families to make memories instead of sitting uninhabited.
One thing to note is a long-term market influencer coming down the pike. Studies estimate that by 2040, 21% of the population will be senior citizens, the highest percentage in history. This could have huge implications on the market in terms of what is desirable as senior citizens look to downsize. If you are a homeowner who is particularly forward thinking, you might want to consider this demographic and the home features that will become especially marketable over the next twenty years. Doing so will ensure that you are leveraging your home’s value to its maximum potential, securing a robust financial future for yourself and your family.