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The value of a home depends on multiple factors. These factors relate to real estate and the external environment such as economic conditions and capital markets.
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GOBankingRates spoke with several real estate industry experts to determine which factors influence property values and why it’s important to fully understand them.
position
One of the most important factors in determining price is the location of the home. Realtor.com senior economist George Ratiu says properties in desirable locations are likely to have higher values.
However, different buyers may have different preferences. “Historically, homes closer to downtown and employment centers held higher values, but there was a time when downtown life was less desirable and real estate values reflected that change.” , some properties are particularly appreciated because they are far from busy downtown areas, such as rural properties and oceanfront homes.”
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size
The size of a house can affect its value. Kevin Bazazzadeh, founder of Brilliant Day Homes, says big homes are generally worth more than small ones.
“Buyers will almost always be willing to pay more for homes that are big enough for their needs and that they can move into without needing repairs or renovations,” Bazazadeh said.
age and condition
Age and condition can also affect a home’s value. Newer homes tend to be more valuable than older homes.
Additionally, homes with in-demand floor plans and amenities are also more likely to see higher value. Ratiu uses the example of an open-plan home with its own home office, high-speed Internet access, and ample garage space. These features have become more popular during the recent remote work period, which can lead to higher home prices.
Possibility of renovation
Today’s homebuyers prefer to redesign and renovate their homes in their own way. Brian Burke, owner and managing owner of Kenna Real Estate and his broker, said properties with high potential for renovation could affect home equity values.
“These possibilities include the possibility of increasing floor space, adding more rooms, adding a pool or an outdoor patio,” Burke said. “Whenever a property offers buyers the opportunity for this kind of personalization, increased demand drives up the value of the property.”
degree of interest
Burke said interest rates can have a big impact on a property’s perceived value.
“When the Reserve Bank raises interest rates on loans, lenders will follow suit. As a result, borrowers will be forced to pay higher monthly mortgage payments, and high mortgage prices will drive up property prices,” Burke said. rice field. “On the one hand, cheap mortgages make properties more affordable.”
“Buyers are more likely to bid on home prices when the capital market experiences a period of low interest rates and offers more affordable borrowing costs,” Ratiu said.
economy and job creation
Another external factor that affects home values is the economy. Ratiu said house prices tend to reflect a growing environment during periods of economic expansion when job numbers rise and buyers feel financially secure.
Brotherly Love Real Estate co-founder and real estate agent Alex Capozzolo says the most powerful external factor influencing real estate values is the demand for jobs. When large companies expand their operations in new locations, smaller companies often follow suit.
Capozzolo uses the example of Comcast, which built a $1.5 billion skyscraper in downtown Philadelphia in 2018. This business expansion brought thousands of new jobs to Philadelphia and allowed Philadelphia’s local real estate market to take off. Small businesses followed Comcast. They started opening more restaurants, breweries and shops in different parts of the city.
“Regional economies have boomed, regions have changed physically, people of different income levels have moved to cities to take advantage of new job opportunities, and real estate values have skyrocketed,” said Capozzuolo. I’m here.
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This article originally appeared on GOBankingRates.com: Homeownership 101: These 6 Factors Really Affect Property Value
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