What impacts your home’s value? Whether you are selling or buying a home or investment property in Bakersfield, value is what matters most. Location, amenities, size, and aesthetics are among the numerous factors that affect what a home is worth today and into the future. Here we explore the variables that influence a home’s value.
1. Location 3X
Location is widely known as the most important factor affecting real estate values. Homes that are located in desirable areas will typically be worth more than homes in less desirable areas. Naturally, people are willing to pay more to live in an area that they perceive as being safe and enjoyable.
Other important location factors are whether a home is close to restaurants, schools, shops, public transportation, and other neighborhood amenities. Is it in a sought-after tourist destination? Is it close to the city center? Is it near employment? The more popular and accessible the location, the more valuable the property will be.
On the flip side, a home is worth less if it is located in an area that is prone to natural disasters, like flooding or earthquakes. A home’s value is negatively impacted if it’s located in an undesirable school district, far from conveniences, near a high-crime area or an airport, or if strange odors are emanating from a nearby business.
2. Size Matters
Home values are often compared in terms of price per square foot, which is the total sales price divided by the property’s square footage. For instance, a 1,500 square foot home that sells for $300,000 equates to $200 per square foot. So a different 1,500 square foot home may be a good deal at $180 per foot, or $270,000, provided the first house does not have superior amenities like a pool or an updated kitchen. Note that larger houses in the same area will typically sell for less per square foot, which is a function of economies of scale. It’s unlikely that a 3,000 square foot home in the same area would sell for $200 per square foot, or $600,000.
Total square footage is one metric, but a property’s value is most often determined by the usable space or living area. Garages, unfinished basements, and attics are usually not included in usable square footage. Its usable spaces such as bathrooms and bedrooms significantly increase the home value.
3. Age & Condition
All other factors being equal, older homes are often valued lower than newer properties because they typically need more repairs and updates. Common sense also dictates that a home’s condition also affects its value. A well-maintained property in good condition will be valued higher than a fixer-upper.
An HVAC system could cost more than $7,000, while replacing a roof can run $10,000 or more. It can also cost more to insure an older home, where premiums can run over 50% higher for homes that are more than 30 years old.
4. Layout & Floor Plan
The floor plan of the house is another significant factor that determines the value. An open floor plan with a great flow usually boosts the property value. On the other hand, a home with an inefficient or awkward layout may be valued lower.
5. Lot Size
Bigger is not always better when it comes to lot size. In some cases, a smaller lot in a prime location could be valued higher than a larger property in a less desirable area. The lot size can also affect the curb appeal, which is how attractive the property appears from the street.
6. Curb Appeal
A home with good curb appeal is often valued higher than a home with poor curb appeal.
7. Upgrades and Updates
Upgrades, updates, and home renovations can significantly increase the value of your property, especially older properties that might have outdated features. Kitchen and bathroom renovations are some of the improvements that could have the biggest impact on the home’s value. You could also consider increasing the number of bedrooms if the price is right. Sprucing up the landscaping and adding a new coat of paint could significantly increase your home’s value.
8. Renovation Potential
Most real estate investors and some homebuyers are interested in the renovation potential of a property. This could be the potential to increase the floor space, add an extra story or an extra bedroom, add an outdoor patio, or add a pool. If there is an allowance for a buyer to personalize or improve a property, then the value of the property will be higher.
Planning & Building Regulations
Constructing a house today requires meeting building regulations and obtaining planning permission. Failure to adhere to these regulations could result in construction being delayed, denied, or demolished. The amount of planning permission and building regulations required can have a major impact on property values.
Impact of Interest Rates
Interest rates are perhaps the most important factor affecting home values. If the Federal Reserve Bank decides to increase the interest on loans, lenders will follow suit. This will mean that borrowers will have to pay a higher monthly mortgage payment on the same principal amount, which typically results in lower home values. On the other hand, a reduction in interest rates means that property will be more affordable, usually leading to higher home values.
Supply and Demand Pressures
Supply and demand pressures have a major influence on the housing market. If market demand is outstripping a fixed supply, the price of properties will rise as more people attempt to buy. When supply exceeds demand, prices will then start declining. Supply can be new home construction or by dividing existing structures into several smaller units.
Supply and demand are closely linked to interest rates and overall economic conditions, which affect purchasing power, housing construction.
Real Estate Comps
If you want to know the market value of a property, check the sale prices of comparable properties (real estate comps) that were sold recently in the area. The properties should be a similar type: single-family homes, multi-family homes, or condos. Other primary value factors are year the built, square footage, bedrooms, bathrooms, and proximity.
To get a general idea of your home’s market value, you can also check online real estate listings. Property Wonk provides 3 home value estimates for comparison. Zillow and Redfin are two other websites that provide estimated values for properties across the United States. These automated valuations do not take into account all of the factors that affect value, so their estimates should be used as a starting point.
A Realtor or a professional appraiser will give you the most accurate estimate of your home’s value. Appraisers take into account all of the factors that could affect value, such as location, layout, upgrades, lot size, and more. If you are planning to sell your home, consult a top real estate agent to before listing it on the market. This will give you a realistic idea of what your home is worth and help you price it correctly.
Economic Factors
The economic conditions of an area will affect the ability to sell or buy a home or investment property. When the economy is booming, there will be more jobs and wages will increase. As purchasing power increases, buyers are more likely to invest in a new home or second home. The increase in demand will eventually result in higher property prices. On the other hand, if unemployment increases and wages drop, fewer people will be able to afford a home. Subsequently, home prices will drop. It is therefore very important to keep up with the prevailing economic conditions of an area before purchasing a home.
Hacks to Increase Your Home’s Value
Making a few quick fixes to your home can increase its value and help it sell faster. Here are a few tips:
Paint the walls in a neutral color
Adding a fresh coat of paint is one of the simplest and most affordable ways to make your home look nicer. Painting the walls in a neutral color will make it more appealing to potential buyers.
Clean and organize the garage
A cluttered garage can be an eyesore and can make your home appear less tidy. Cleaning and organizing the garage can be a quick and easy way to make your home look nicer.
Fix any cracks or holes in the wall
If there are any cracks or holes in the wall, fix them as soon as possible. Small repairs like this can make your home look nicer and more well-maintained.
Landscaping
A well-manicured lawn and garden can add curb appeal to your home. Spending some time on landscaping can make your home more attractive to potential buyers.
What is a Buyer’s Market?
A buyer’s market occurs when there are excess homes available relative to the number of buyers in the market. This often happens during economic downturns or a high interest rate environment, when potential home buyers become hesitant to make a large purchase. Prices are typically more negotiable in a buyer’s market, as sellers are more willing to accept lower offers to remain competitive with other homes on the market.
What is a Seller’s Market?
Conversely, a seller’s market occurs when the number of buyers seeking homes is high relative to the number of homes for sale. This often happens in areas with strong job growth, limited housing availability, or in a low interest rate environment. Property values typically increase in a seller’s market, as there is more competition among buyers for the same, limited number of homes.
Conclusion
It is important to know what a home is worth before buying or selling. Though online tools can be helpful, there are other factors that you must consider for an accurate estimate. Though these tools account for many factors that affect property value, such as recent real estate market trends and real estate comps, it’s important to also review other factors such as crime rates and unemployment. You should work with a professional real estate agent who has experience with property valuation and economic conditions in the local area.
Use Property Wonk’s valuation tool to see 3 home value estimates at once!
