4 Primary Factors that Influence the Price of Your Home
While the value of your home is ultimately determined by what buyers are willing to pay for it, several factors influence a house’s price and the buyer’s final decision. From location and neighborhood comparable sales (comps) to the home’s age and condition, Maleno, a family-owned custom building and real estate company, has compiled a list of four factors that influence the price of your home.
1. Supply and Demand
Like with any good or service, the housing market relies on supply and demand. When the demand for housing is low and the supply is abundant, prices typically decrease. This scenario is referred to as a “cold market.”
When demand for housing is high and the supply is low, the cost of your home may increase. This scenario is referred to as a “hot market.”
As a seller, you’ll thrive in a hot market. Low housing supply or the demand for a specific location can lead to a bidding war, wherein two or more parties compete for ownership of a property by increasing their bids.
Economic indicators, such as gross domestic product (GDP), employment data, and the price of goods, can help sellers and buyers gauge what the housing market will look like. Essentially, the housing market is directly tied to economic activity.
If money becomes scarce and more difficult to borrow, fewer buyers enter the market searching for a home and demand decreases. Supply may also decrease if homeowners are not able to sell their homes for their desired amount. Interest rates generally rise when the economy is doing well, which increases mortgage loans and the overall cost of a home.
As it stands right now, the housing market has been and continues to be red hot! The COVID-19 Pandemic, and the record-breakingly low-interest rates that came with it, inspired a buying spree at a time when supply is markedly low.
2. Location and Neighborhood Comps
Location plays one of the most essential roles in determining the cost of a home, and there are individual factors to consider, such as:
- Lot Location: nearby schools, bodies of water, highways, amenities, grocery stores, gas stations, hospitals, and other infrastructures
- Traffic and Noise Level: busy roads, construction
- Safety: high or low crime rates
- Potential for Development: lack or abundance of land available for growth
When reselling your home and considering an asking price, look to the other houses in your neighborhood. If you’re unsure how to price your home, reach out to a real estate agent specializing in your area.
3. Size and Layout
According to the U.S. Census Bureau and their 2020 Characteristics of New Housing, “the median size of a completed single-family house was 2,261 square feet.” However, the median size varies significantly between rural, suburban, and urban areas.
So while a “big” house is relative to its location, typically, the bigger the home, the higher the price point in a particular area. But it’s not just size that matters; it’s the layout and design as well. In a recent study by the National Association of Home Builders, researchers found what homebuyers want most:
- Laundry room (47% said must have, 40% said desirable)
- Exterior lighting (42% said must have, 45% said desirable)
- Ceiling fan (49% said must have, 34% said desirable)
- ENERGY STAR rated windows (39% said must have, 44% said desirable)
- Patio (33% said must have, 49% said desirable)
- Double kitchen sink (42% said must have, 39% said desirable)
- Walk-in pantry (34% said must have, 47% said desirable)
- Front porch (34% said must have, 47% said desirable)
- ENERGY STAR rated appliances (33% said must have, 48% said desirable)
- Hardwood floor (32% said must have, 49% said desirable)
- Full bath on the main level (42% said must have, 38% said desirable)
- Energy efficient lighting (31% said must have, 49% said desirable)
4. Age and Condition
Typically, newer homes will cost more than a home that was built 50 or more years ago due to wear and tear and changes in the way houses are constructed. Often the higher price is worth it to buyers as they’ll likely avoid repairs in the near future.
On the flip side, if a home bears historical significance and the architecture is in vogue at the time, a home’s value can increase with age.
Just keep in mind, many buyers want their homes to be move-in ready. To better position your home to receive an above-market offer, be sure to:
- Clean
- Declutter
- Deodorize
- Emphasize key selling points
- Enhance curb appeal
- Make any necessary repairs: e.g. leaks, cracks in flooring, screw holes in walls, broken appliances
- Remove personal photos from walls
- Repaint
Be sure to also find a seasoned real estate agent that can help you market the home.
Choosing Maleno
Unsure of how to get your home ready for listing and enter the housing market? Maleno Real Estate is here to help! Our team of seasoned real estate professionals will provide you with all the necessary housing information and guide you through every step of the selling process. If you’d like to learn more about Erie's housing market, our current listings, our custom building and design process, or even find an agent, contact us today!
Contributed by Matt Flowers
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