Factors that Impact Property Values

The real estate market, like the stock market, fluctuates. Over the past three months, a question we keep hearing is:

What will happen with home property values?

Below, we review the internal and external factors that impact property values. While some outside factors that cannot be predicted, there are also things homeowners can do to maintain, and sometimes increase, the value of the home. 

Internal Factors

The homeowner can control internal factors. Pride of homeownership and regular maintenance go a long way when it comes to the value of a home. Some of the internal factors that an make a property appreciate or depreciate in value include: 

Overall condition of the house

Without regular maintenance, the value of the house will depreciate. Maintenance includes keeping the house and property clean and in working order. Keep in mind that regular maintenance by itself will not increase the value of a property, but will avoid a decrease. Plan to set aside 1-2% of the purchase price for upkeep every year. 

Improvements + Upgrades

Many renovations and improvements can add to the home’s value, but sometimes homeowners are surprised when they spend money on an upgrade, only to learn it won’t increase their selling price. As a general rule of thumb, kitchen and bathroom renovations have the most impact on the value of a home, while installing a pool may not be a helpful selling point. If you plan on making upgrades before listing your home for sale, talk to you real estate agent about what renovations are most beneficial. 

External Factors

External factors are generally out of your control, but they can be studied and researched so you can be better prepared. External factors include:

The Economy

At both the state and national levels, the state of the economy plays a role in the value of homes. When the economy is strong, home values generally increase as mortgage rates decrease. During a recession, the impact on home values depends on the recession. For example, during the housing crash, property values decreased drastically. But in three of the past five recessions, home values actually increased. 

Zoning Laws

Areas with tightly controlled zoning laws from residential, commercial, and industrial space can add value to residential areas. On the other hand, in locations where zoning is not controlled, property values can decrease. For example, if an industrial park goes up next to a residential neighborhood, that can negatively impact the homes in the area. 

In our local markets on the Connecticut shoreline, property values have remained steady throughout the first half of 2020. Low inventory, low mortgage rates, and active buyers mean that we don’t anticipate property values going down in the foreseeable future. 

 

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