Let’s Talk About Home Appreciation and Why it is So Important

Home Appraisal Article

Summary: Home appreciation is the increased value of a primary, secondary, or investment property over a period of time. Homes can appreciate naturally or intentionally. Higher appreciation allows homeowners to make a profit when selling or having more equity to later utilize on a cash-out refinance.

Home appreciation is the increase of a property’s value over a period of time. The value of a home fluctuates depending on the changes in the housing market and updates or renovations a homeowner makes. These changes play a key role in determining appreciation rates and the benefits available to homeowners.

Natural and intentional appreciation can impact the value of a home. Some natural appreciations are:

  • Housing Market
    • Supply and demand are key in appreciation trends.
    • A seller’s market increases home appreciation.
    • A buyer’s market makes home values decrease or stay consistent.
  • Location
    • The developments around the home impact property value.
    • Homes in a well-known school district, for example, have higher values.
  • Interest Rates
    • Low interest rates encourage consumers to buy a house, increasing housing demand.
    • High housing demand increases appreciation values.
  • Future Development Within the Area.

Intentional appreciations are home improvements made by a homeowner to increase the property’s value. Below is a list of common improvements.

  • Home improvements
    • Renovations and upgrades are the best way to increase a home’s value.
    • Bathroom and kitchen renovations, for example, have high investment returns (at least 50%).
  • Interior and exterior upgrades
    • Upgrading the condition of the home can increase its value.
    • Interior updates can include light fixtures or new windows.
    • External upgrades such as an updated patio.
  • Additional square footage
    • Building an additional room increases your square footage which positively impacts your home’s value.

Whether you are a first-time home buyer or a seasoned homeowner, it is important to stay in tune with your home’s value and appreciation rate. On average homes appreciate at a rate between 3% to 5% but are adjusted depending on the housing market and its changes.

High home appreciation rates can be tied to low interest rates. Low interest rates allow buyers to have more buying power. Higher buying power creates housing demand which directly correlates to increased home values and high home appreciation. Greater appreciation rates offer immense benefits to homeowners, such as a profit when selling or having more equity to utilize on a cash-out refinance.

For more information, chat with us at callhallfirst.com or give us a call at 866-Call-Hall.