Homeowners feel delighted to know that their house value is increasing. However, the price of a house increases for a reason, and an important reason is regular upkeep and upgrades. Usually, a house with negligible renovation and updates can often lead to depreciation. Therefore, it's important to understand the home value and the factors that can affect the value of homes.
Although house prices are reaching heights, it's not difficult to achieve profits through astronomical gains in the housing market. With the understanding of factors, it's also important to know how house appreciation works and how to use it to your benefit. This blog covers all factors, calculations, and ways to add value to your home.
What is House Appreciation?
Real Estate appreciation refers to the increase in a house's value over a period of time. On the contrary, depreciation is when the house value goes down over time.
For instance, if you have bought a house for $400,000 and a year later, its worth increases to $500,000. This represents an appreciation of $100,000 of the house.
In recent years, house value has grown rapidly. According to the data from the National Association of Realtors, the median house value has touched the highest price of $426,000.
People who invest wisely will likely gain maximum appreciation of the house. However, for people who invest at a time when property prices are soaring high, the chances of appreciation are low and slow.
Factors Affecting House Appreciation
Here are a variety of factors that affect house appreciation, where some are due to homeowners' proper planning while others are unpredictable.
-
House Market Conditions: The housing market condition eventually influences a house's appreciation. With the need for supply and demand exchange, a seller's market house appreciation tends to increase. On the other hand, a buyer's market slows down or gradually decreases.
-
Location: The location of a house significantly affects the house appreciation. National housing, on average, provides a broad perspective of overall trends. However, localized data shows that real estate appreciation differs between cities, neighborhoods, and property types.
-
Interest Rates: Interest rate trends influence appreciation due to potential house buyers. Lower interest rates usually drive buyers to invest in properties.
-
House Upgrade: House upgrades, including renovation and replacement, can gradually raise the value of your house.
-
Government Policies, Tax, and Discounts: Homeownership policies, tax reductions for investment, or discounts for first-time house buyers can increase demand, which leads to appreciation.
Average House Appreciation Rate
According to the report of the Federal Housing Finance Agency, the national housing market has experienced positive annual appreciation every quarter for several years. However, this significant increase cannot be seen by many homeowners as the average rate of house appreciation differs due to place and market conditions.
For instance, Syracuse, New York, has seen an annual appreciation rate of 14.2 percent in recent years; Austin and Texas, on the other hand, have faced a decrease of 3.2 percent.
How to Calculate House Value Appreciation Rate?
The calculation method is simple. You are just required to follow the calculation process step-by-step.
1. Find Out the Original and Current Price of the House
The original price is the amount you paid for the house. The current price is the house's present market value.
2. Calculate the Appreciation Rate
Subtract the original price from the current price. Then, divide the result with the original price. Lastly, multiply the outcome by 100 to get an appreciation rate.
Here's the formula:
(Current price - Original price) / Original price × 100
For instance, let's suppose you bought a house for $300,000. Over time, its market value reached up to $400,000.
Then subtract $400,000 - $300,000. You receive a value increase of $100,000.
Now, calculate the appreciation rate.
$100,000 / $300,000 ×100 = 33.3%
Ways to Add Value to the House
Following are the ways to increase your house value.
House Upgrade and Renovations: A house upgrade includes the exterior as well as the interior part of the house. Exterior houses or interior houses add value to the house and increase its visibility. Thus, invest in house updates to meet or exceed market standards and enhance its aesthetic appeal. This raises selling opportunities and attracts potential buyers.
Enhanced Energy-Efficiency: Numerous house buyers look for an energy-efficient house. A house with an installation of solar panels, windows, insulation, and a smart thermostat can be an impressive selling scheme. It increases house value and decreases monthly energy costs.
Extra Square Footage Space: Consider adding a deck to enlarge the house's square footage, which gradually increases house value.
Conclusion
House appreciation tends to increase your house value over time, which depends on housing market conditions along with many other factors discussed in this article. The housing market appreciation rate has experienced a significant increase over the past years. While every country doesn't have conducive housing market conditions, factors like location, interest rate, and house upgrade affect house appreciation rates. You can also increase your selling price by upgrading and renovating the house.
