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What Affects a Home’s Value?

Table of Contents

Illustration of a property showing what affects home value. 

Top 7 Factors that Affect Home Values During the Year

Figuring out what affects a home’s value could drive you crazy. In truth, values naturally fluctuate based on many factors. However, your home’s value ultimately equals whatever a buyer is willing to pay for it on the open market. So, how do you figure that out?
In the long run, property values always increase, but recent market conditions — including rising interest rates — have caused the demand for homes to fall. In times like this, it’s important to understand what affects home value so you can figure out what “fair value” means for a property.

1. Location

The location of a home is the one thing you can’t change, which is why it’s at the top of the list of what affects home value. If a home is located in a desirable neighborhood that’s safe and quiet with lots of amenities, that will automatically cause the home to sell for a premium. However, location goes beyond the neighborhood itself.
If the city or general area has more companies moving in and bringing jobs with them, that automatically generates more value for the home. Likewise, being close to shopping and public transportation increases the value of a property. It would help if you also considered the distance to local schools and the ratings those schools get in your calculations.

2. Home Size

If you ask any real estate agent what affects home value, one of the top answers is its size. Home size significantly influences value, and so does the lot size. However, the layout is another critical factor to consider.
Two similar homes of the same size will not sell for the same amount if one has two bedrooms and the other has three, but squeezing in more bedrooms isn’t always a good thing. For instance, a spare bedroom means very little if the master suite is too small to fit a king bed comfortably.
When evaluating what affects home value, you must look at how well its space has been utilized. Layouts that allow for flexible room usage — like a second living room that can double as an office — always create added value. Moreover, open layouts can make a small home feel larger, but they can also take away privacy and versatility on the main floor. For these reasons, it’s best to walk through the home yourself.

3. Age and Condition

As a home ages, it’s considered less valuable because its parts — including the roof, flooring, and appliances — will begin to break down from normal wear and tear. Of course, homes built in the early 1900s and before can be perceived as more valuable due to their historical significance if properly maintained.
As with home size, age is only one factor to consider. A home built a decade ago that its owners meticulously kept will give a newer home a run for its money if the newer home shows careless damage. That’s why you must factor the home’s condition into your estimate, which often requires you to dive into features and upgrades.

4. Features and Upgrades

Homeowners can build remarkable value in older properties by investing in certain upgrades. That could be a major renovation designed to bring the look and feel of the property into modern times. It could also mean a fresh coat of paint and replacing outdated appliances. Improvements and upgrades reflect the home’s condition and show potential buyers the care a person has put into their home.
Over and above “upkeep,” like replacing the roof or appliances, additional value can be created with optional upgrades a homeowner might have invested in at some point. Depending on the home’s area, some upgrades will have much more value than others. For instance, a finished basement is worth about five times more in Portland than in Atlanta.
Some value-add upgrades can seem relatively small but could have a big impact, especially on the right buyer. Examples include a fenced yard, a whole-house security system, or walk-in closets.

5. Current Season

Because a home’s value is based on the simple principle of supply and demand, its value would still fluctuate throughout the seasons even if every other factor stayed the same.
Generally, demand goes up as the weather warms, so spring and summer tend to see the highest home values. Buyers are, in essence, competing against each other, making it a seller’s market. During these months, a seller is less likely to accept an offer with a lot of concessions.
Demand goes down as the weather cools, so fall and winter tend to see prices dip. However, homeowners know this or want to avoid selling while children are in school or during the festive holidays. Subsequently, few people list their homes during the winter, so supply drops substantially. Finding a home for sale during the colder months can be tough, even though you’ll have little competition.
If you’re hoping to invest in a property, the off-season will give you the upper hand in negotiations, but you’ll likely have a tougher time finding homes.

6. Interest Rates

Interest rates impact home values in a couple of ways. Long-term interest rates directly increase the cost of a mortgage, reducing a person’s borrowing power. Short-term interest rates increase the cost of paying off credit cards and taking out personal loans, which can also decrease a person’s borrowing power.
Even if you don’t plan to take out a loan to buy a home, interest rates will still impact a home’s value because they impact the demand factor. When interest rates rise, fewer people can afford to buy a home, so the demand falls.

7. Local Market

What affects home value more than anything is its local market, which sums up multiple factors.
Despite how the seasons impact the housing market at the national level, certain areas might have completely different scenarios based on various factors. For instance, many people who live in the north escape to Arizona in the winter, so demand increases as the summer ends.
Beyond the time of year, the local market can also impact a home’s value when major events occur. For example, when a major company announces the construction of a new plant that will create hundreds of jobs, nearby property values increase accordingly.
Knowing what affects home value will help you prepare better and make a smart investment. If you need help locating a property, ProspectNow can help. Click here to learn more about our prospecting tools.

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