On the face of it, there seems to be no rhyme or reason why home prices are rising and how quickly they’re rising.
Right now, the main reason for this seemingly uncontrollable rise is supply and demand. There are just not enough homes for sale for the number of buyers in the market.
Whenever anything is in short supply, yet demand is high, it becomes more valuable.
Although mortgage rates are ticking back up as of this writing, they’ve been at record lows. Cheap money draws people into the market.
These factors are two among several other reasons homes are so expensive right now. If you’re in the market to buy, it pays to understand the how and why behind a seller’s pricing strategy.
Let’s take a look at some of the more important factors when it comes to deciding the price of a house.
The Impact of Location: A Lot More Than Just Crime Rates
There are general factors that influence the price of any particular house, such as the economy, the number of foreclosures in the area, and the currently available housing inventory.
Then there are more specific factors, such as environmental aspects and location that may affect, positively or negatively, a home’s value.
The location of a house, above all else, determines its value. “Location” refers not only to the region but also to the neighborhood, the street, and even to the location of the lot within the neighborhood.
Homes in regions with steady job growth and rising incomes tend to be worth more than those in areas with stagnant or negative growth. In beach communities, houses with ocean views are worth more than those without. Houses on cul-de-sacs are more in demand than those on busy streets.
A home located near a landfill will depreciate in value much more quickly than one further away, according to Brian Johnson of the Pima County Assessor’s Office.
Location, therefore, encompasses many aspects. Additional location considerations impacting the value of a house include:
- nearby restaurants and shopping centers
- proximity to highways or freeways
- size of the lot
- traffic issues
- transit systems
- zoning issues
A neighborhood’s crime rates do have a bearing on home values. With the advent of the National Sex Offender Registry, created by the U.S. Department of Justice in 2005, home buyers have an easier time determining the number of convicted sex offenders living near a home they may be interested in purchasing.
Not only is this important information for your personal safety, but homes within one-tenth of a mile of a sexual predator’s residence are worth 9 percent less than those further away, and take 10 percent longer to sell, according to researchers at Longwood University.
While most residents are aware of the crime-ridden areas of their city, newcomers are not, so databases such as this, and a phone call to the local police department can provide the statistics needed to make a better-informed purchasing decision.
While it goes without saying that a well-maintained home is worth more than a fixer-upper, appraisers take far more into consideration when checking a home’s condition.
A home that has been updated, with energy-saving windows and appliances will be worth more than the house next door that hasn’t been updated.
Certain remodeling features add value as well, such as bathrooms and updated kitchens. In an area with older homes, those with updated wiring and plumbing have added value.
A neighbor’s home also has an impact on the value of those around it. A homeowner can sink thousands of dollars into home improvements but if Jack next door has a rusting auto carcass and dying trees in his front yard, all houses on the block suffer, in terms of lower values.
Time of Year
Real estate sales are seasonal, so when you shop for a home may have an impact on its price.
You may hear that the best time of year to buy a home in spring. Remember, that’s when there are the most buyers in the market, so it’s actually the second best time to sell, not buy.
Another good time of the year to sell a home is in summer. Most families wait until after the school year ends to make a major move, so homes tend to sell much more quickly and for higher prices in the summer.
But that means competition for buyers. While spring is when neighborhoods tend to look their best, with everything in bloom, winter provides the best opportunity to get a bargain on your home purchase.
If a seller is motivated enough to place his home on the market in the winter, especially around the holidays, he may just be motivated enough to negotiate on price.
Granted, you will need to be able to look beyond bleak landscaping, but, aside from a good price, you’ll face less competition.
These are just a few things to keep in mind when home shopping. If you need to buy or sell now, reach out to us for some money-saving/making tips.