A Guide to Home Appreciation
When you first buy a home, selling it is probably the furthest thing from your mind — but maybe it shouldn't be. You may plan to live there for the next decade or longer, but the unexpected can change even the most well thought-out plans. If your family grows or new career opportunities arise, you could end up moving sooner than you think.
This unpredictability is exactly why you should consider the projected home appreciation of a property before you buy it. You'll want to have an idea of whether the home is likely to increase or decrease in value in the coming years so that you know how easy (or difficult) it will be to sell, and whether or not you'll be able to make a profit. If you sell your house for a profit, you'll have more options when you're buying a new home, or extra money to put into savings or toward another important financial goal.
Top Factors That Influence a Home's Appreciation
While there are no guarantees that a home's value will increase, the following are pretty good indicators:
- It's a Smaller Home: Small homes have been appreciating at a greater rate than larger ones in recent years, a trend that holds among different generations. Realtor reported that millennials are seeking out smaller starter homes, while baby boomers want to downsize as they reach their retirement years. Consider, too, that if the economy takes a downturn, people will be more inclined to buy smaller properties.
- It's in an Up-And-Coming Neighborhood: Being in the heart of a rapidly growing city could work in your house's favor, even if the house itself isn't new or as big as you may have hoped. Small and older houses can be desirable if they're in a trendy or highly sought-after area. Research the local economies to gauge whether the house will likely appreciate based on location alone. Proximity to great schools, conveniences, and cultural amenities can go a long way toward making your property more attractive to potential buyers.
- It Has an Appealing Exterior: Curb appeal is a significant factor in determining whether a home will sell, especially for a good price. What does your house look like from the outside? Does it have distracting or out-of-place features? Or is it well-maintained and does it fit in with the rest of the neighborhood?
- The Property Itself Has Value: The land on which your house stands could be just as valuable as the home itself, according to Trulia. If your property lies along a waterfront or another scenic area, chances are its value will go up, or at least remain competitive if there's a downturn.
Think About Home Appreciation Early
Home appreciation may not be your priority when buying a new place, but it's worth keeping in mind. Should you end up needing to sell, you'll be glad that you took the appreciation potential into account early on. If the house appreciates, you'll be in a solid financial position — but even if it doesn't, it helps to have realistic expectations. You don't want to assume you'll be able to sell the house for a profit, only to be disappointed if you get back less than you originally paid.
Ideally, you'll consult with a real estate agent and Mortgage Loan Officer who can help you understand the market and the implications of selling or keeping your home. But evaluating your appreciation prospects will help you make an informed decision when you buy — and when it's time to strategize for your future.