Historically, home appreciation has always been a factor in purchasing a home. Home appreciation remains consistently high in today’s market, providing sellers with an advantage. Appreciation remaining high is the best news for sellers as they’re often able to capitalize on the home’s increased equity.
However, timing is everything.
Selling your home at peak equity offers options such as a higher down payment on a new home. With demand still outweighing supply, this is an ideal time to leverage your asset into the next stage of your home journey.
The following sections will look into home appreciation and how it affects today’s sellers.
What is home appreciation?
Home appreciation is defined as the increase in the value of a home or property over time. An increase provides ample opportunity for homeowners to profit by selling or renting their houses.
In contrast, home depreciation is the decay of a home or property’s worth over a given timeframe. Determining the value of the home or property is key to assessing the overall value and worth.
What causes home prices to increase?
There are a few elements that often result in home prices increasing, including:
- Location
- Economy Health
- Interest Rates
- Home Renovations
Each of these factors is a significant component of a house’s value and helps create home appreciation. Let’s dive deeper into the cause and significance of each element.
Location
For many buyers, the location of a home is often one of the biggest factors in whether they will pay more for the house. If a dream home is in a less desirable location, selling it above the asking price can be challenging. However, if the house is in a good neighborhood with a great school system or local community, it can be easier to sell it for a higher price.
Economy Health
Home appreciation is often indicative of the state of the housing market. It can also be significantly impacted by the economy as a whole. The market signals the fragility or stability of the economy, thus supporting a purchasing decision. Supply and demand fall in line with the state of the economy, dictating the availability of materials and homes.
Interest Rates
During low-interest rates, more people are likely to purchase homes as it often equates to a lower monthly payment. Likewise, if interest rates are high, most potential buyers will wait to purchase a house.
Home Renovations
Home renovations are typically considered a vanity metric. However, particular home improvements can push the property into home appreciation. Implementing modern features and systems can draw higher offers from potential buyers.
What to expect from the housing market in the coming years
Predictions always surround the status of the market. As we project future forecasts, there are housing trends that naturally resurface. Now that we know the factors that play a significant role, we can begin to predict when major shifts will occur.
As history repeats, the market will continue to shift between a buyer’s and seller’s market. It’s important to keep an eye on trends in the housing market as you plan to either buy or sell a home.
I’m a local real estate professional with decades of experience in the Pasadena area. I am available to assist you in buying or selling a home, so please contact me if you would like to schedule a time to discuss your needs.