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What Makes Property Value Increase?

Jenna InouyeMay 30, 2024
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Does your home office increase the value of your home — or does it make it harder to sell? Will potential buyers love your patio and pool — or are they looking for something more low maintenance? 

Your home is your safe haven. But it’s also an investment. And when it comes to selling a home, one of the foremost questions on every homeowner's mind is: "What makes property value increase?" 

Understanding the factors contributing to property value growth can empower homeowners to make informed decisions and strategically enhance their home's worth. 

In this blog post, we'll explore the various elements that can lead to increased property values, from location and market trends to home improvements and economic factors. We’ve conducted independent research and talked to two real estate professionals to provide you with valuable insights into maximizing your property’s potential:

  • Nancy Reynolds of Rainmaker Real Estate, a Realtor® who enjoys working with diamonds in the rough.

  • Dustin Parker, founder and CEO of the Parker Group, a brokerage of nearly 100 professionals.

Timing: understanding the real estate market

Staying informed about current market trends is crucial for understanding property values. 

Reynolds says, “Now, more than ever, a strong local agent has the opportunity to help sellers and buyers succeed.” According to Reynolds, real estate professionals can help sellers stay in tune with how buyers will respond to the price and marketing of their property. Sometimes, the price of your home has nothing to do with your home — it has to do with timing.

Real estate markets are influenced by various trends that fluctuate over time. Here are some key trends to keep an eye on. Foremost, you can start by understanding whether you’re in a buyer’s or seller’s market

Buyer’s market

A buyer’s market occurs when more homes are available than buyers looking to purchase. This surplus of inventory gives buyers an advantage. Key characteristics of a buyer’s market include:

  • High Inventory: An abundance of homes for sale provides buyers with numerous options, leading to longer listing times for sellers.

  • Lower Prices: With more choices and less competition, buyers can often negotiate lower prices, leading to a decrease in property values.

  • Seller Incentives: Sellers may offer incentives, such as covering closing costs or making repairs, to attract buyers and close deals.

  • Longer Time on Market: Homes tend to stay on the market longer as buyers take their time to make decisions, knowing they have many options.

Factors contributing to a buyer’s market include:

  • Economic Downturn: A struggling economy can lead to reduced buyer confidence and fewer people looking to purchase homes.

  • High Unemployment Higher unemployment can decrease the number of potential buyers, increasing housing inventory.

  • Overbuilding: When new construction outpaces demand, it can lead to an excess of homes on the market.

Seller’s Market

Conversely, a seller’s market arises when there are more buyers looking to purchase homes than there are properties available for sale. This creates a competitive environment favoring sellers. Key characteristics of a seller’s market include:

  • Low Inventory: Fewer homes for sale means buyers have limited options, increasing competition for available properties.

  • Higher Prices: Increased demand and limited supply often drive up home prices, as buyers are willing to pay more to secure a property.

  • Quick Sales: Homes tend to sell quickly, often receiving multiple offers and spending less time on the market.

  • Fewer Concessions: Sellers have the upper hand and are less likely to offer concessions, such as price reductions or repairs, to buyers.

Factors contributing to a seller’s market:

  • Strong Economy: A robust economy with high employment rates boosts consumer confidence and increases the number of potential buyers.

  • Low Interest Rates: Lower mortgage rates make borrowing more affordable, increasing the demand for homes.

  • Limited New Construction: When new housing developments are slow to come to market, the limited supply can contribute to a seller’s market.

You can sell a home whether you’re in a buyer’s or seller’s market. It will just change your strategy. At Redy, you can find an affordable agent that will work with you to create the perfect marketing plan for your property — regardless of local and national trends. 

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Location, location, location

That all being said, real estate is hyper-local as well. It’s not just the global, national, or even regional buyer’s market. Sometimes it comes down to things as close as a neighborhood.

Either way, the adage "location, location, location" is more than just a cliché in real estate; it's a fundamental principle that significantly impacts property values. The desirability of a location can be influenced by several factors, including:

  • Proximity to Amenities: Properties close to essential amenities such as schools, hospitals, shopping centers, and recreational facilities generally see higher demand. Being within a short distance of these conveniences can make a property more attractive to potential buyers, thereby increasing its value.

  • Quality of the Neighborhood: The overall appeal of the neighborhood, including its safety, cleanliness, and community spirit, plays a crucial role in property valuation. Areas with low crime rates, well-maintained public spaces, and active neighborhood associations often experience higher property values.

  • Access to Transportation: Easy access to public transportation and major highways can significantly boost a property's value. Homes that are conveniently located near transit options tend to be more desirable, especially in urban areas where commuting is a daily necessity.

  • Future Development Plans: Upcoming infrastructure projects, such as new schools, parks, or public transit expansions, can also enhance property values. Buyers often look for areas with promising future developments, anticipating that these improvements will lead to increased property values over time.

Investopedia also notes that it’s not just about geography but also things like lot size — so you may need to think beyond the size of your home when you’re thinking about value.

Home improvements

Investing in home improvements can substantially boost property values. Strategic upgrades not only make a home more appealing to buyers but also increase its functionality and aesthetic appeal. 

According to Reynolds, “We've had a few years of the market surging regardless of the location and, sometimes, even the home's condition. A home with a lot of deferred maintenance on a busy corner would still command multiple offers and sell quickly. Today, the home needs to be presented really well, marketed really well, priced correctly.” 

Of course, updating your home all at once can be stressful. And you don’t really get to enjoy those updates, do you? “Keeping a home's style and amenities current can prevent it from becoming outdated,” Parker notes. If you’re simply thinking about selling your property in the future, consider making those updates now — while you still have time to enjoy them. 

Kitchen and bathroom renovations

Daltile estimates that the ROI for a bathroom renovation is about 70%. One of the best ways to increase the value of your home is by modernizing your kitchen. Upgrading your kitchen with new, energy-efficient appliances, stylish countertops, and contemporary cabinets can dramatically improve its functionality and aesthetic appeal. Whether you're a culinary enthusiast or just enjoy hosting family gatherings, a renovated kitchen can transform your home into a modern, inviting space. Imagine the joy of cooking in a well-designed kitchen equipped with the latest appliances and ample storage.

Similarly, bathroom upgrades can also yield a high return on investment. Simple changes like updating fixtures, adding double sinks, or installing a new shower can make a world of difference. A well-designed bathroom not only enhances daily living but also appeals to potential buyers. Think of the convenience of a new, spacious shower or the luxury of modern fixtures that offer both beauty and efficiency.

Energy efficiency

In today's environmentally conscious world, energy efficiency is a major selling point for homes. Modernize suggests upgrades to hot water heaters, thermostats, and even skylights

Installing energy-efficient windows and doors can significantly reduce your utility costs and make your home more appealing to eco-friendly buyers. These upgrades can keep your home warmer in the winter and cooler in the summer, creating a comfortable living environment year-round.

Improving insulation and upgrading your heating, ventilation, and air conditioning (HVAC) systems are fantastic for making your home more energy-efficient. Enhanced insulation helps maintain a consistent indoor temperature, reducing the strain on your HVAC system and lowering energy bills. Modern HVAC systems are more efficient and provide better air quality, contributing to a healthier living space.

Curb appeal

First impressions are lasting, and the exterior of your home is the first thing potential buyers see. Enhancing your front yard with fresh plants, a well-maintained lawn, and attractive garden features can create a welcoming atmosphere. Thoughtful landscaping can transform your property, making it stand out in the neighborhood.

Exterior upgrades like repainting your home, updating the siding, or adding a new roof can also significantly boost your home's curb appeal. A fresh coat of paint or new siding can give your home a modern look, while a new roof improves aesthetics and provides better protection against the elements. It doesn’t have to be expensive: HGTV provides 25 days to improve curb appeal in under $100.

Smart home technology

Incorporating smart home technology can greatly increase your home's attractiveness to buyers. Installing smart security systems, for instance, can enhance the safety and security of your home. These systems can include features like cameras, smart locks, and motion detectors, all controllable from your smartphone. And they serve a dual purpose by increasing energy efficiency as well.

Home automation is another area where modern technology can add convenience and appeal. Smart thermostats, lighting systems, and voice-controlled devices can make daily living more efficient and enjoyable. Imagine adjusting your home's temperature, lighting, and security settings with just a few taps on your phone or a simple voice command.

Additions and expansions

Adding extra rooms to your home can significantly increase its value. An additional bedroom or bathroom can make your home more versatile, accommodating growing families or providing space for guests. These additions can make your home more attractive to potential buyers looking for flexible living arrangements.

Creating outdoor living spaces is another excellent way to enhance your property. Adding decks, patios, or outdoor kitchens can expand your usable space and provide a perfect setting for relaxation and entertainment. Imagine hosting summer barbecues on your new deck or enjoying a quiet evening on your beautifully designed patio.

But other than strategic and timely updates, Parker suggests keeping it simple. “Simple upgrades, such as modern fixtures and fresh paint, along with proper upkeep, can significantly impact long-term value.”

Other external influences

Several external factors beyond the homeowner's control can also affect property values. These influences can range from environmental factors to community developments and even global economic conditions.

Environmental factors

Areas prone to natural disasters such as floods, hurricanes, or earthquakes may see fluctuating property values based on perceived risk and insurance costs. Long-term climate change can impact property values, particularly in areas vulnerable to rising sea levels or extreme weather patterns. USA Today estimates that $34 billion in real estate could be affected by flood by 2050.

Community and Infrastructure Development

The quality and availability of public services, such as schools, parks, and emergency services, can enhance property values in a community. New infrastructure projects, including roads, bridges, and public transit systems, can increase the accessibility and desirability of an area, thereby boosting property values. We frequently see people choosing properties not based on the neighborhood alone but on the school district.

Political and economic stability

Zoning laws, property taxes, and development regulations can significantly impact property values. Favorable policies that encourage development and investment can lead to higher values. Economic stability also matters in many ways — from whether jobs are available in the area to whether Main Street is flourishing in the city. 

Social and cultural factors

Active community organizations and events can foster a strong sense of community, making neighborhoods more attractive to potential buyers. There are some neighborhoods people just can’t wait to get into. Proximity to cultural amenities such as theaters, museums, and restaurants can also enhance the appeal and value of properties.

Global investment trends

Finally, influxes of foreign investment can drive up property values, particularly in major cities and desirable locations. This is very true regarding properties that would make excellent turn-key rentals. The global economic environment can also influence local real estate markets, especially in areas heavily reliant on international trade and tourism.

What is your property worth?

Understanding what increases property values is essential for homeowners looking to maximize their investment. Homeowners can strategically enhance their property's value by considering location, economic conditions, home improvements, market trends, and external influences. 

Whether investing in key home upgrades, staying informed about local and global market trends, or understanding the impact of community and infrastructure development, there are numerous ways to influence property values positively.

But that’s a lot to try to grasp when you’re concentrating on selling your home.

Your real estate agent can help.

You don’t need to wait until you’re ready to sell to contact a real estate agent — they can help you prepare your home, too. At Redy, you can list your property and get matched with real estate professionals in your area, who will even give you a cash reward to represent your listing. Connect with an agent through Redy today.

Jenna Inouye is a professional freelance writer specializing in the areas of real estate, technology, and finance. Her professional experience extends to her work in property management, accounting, and brick-and-mortar retail, as well as a substantial background in journalism and thought leadership for businesses and high-net-worth individuals.

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