When it comes to the world of real estate, determining the price of a home isn't a simple matter of square footage and the number of bedrooms. It's a multifaceted puzzle, where each piece represents a unique factor that can either elevate or diminish a property's value. For both buyers and sellers, understanding the intricate interplay of these factors is essential in making informed decisions and achieving successful transactions.
This post will explore the critical factors that influence the price of a home, shedding light on why two seemingly identical houses can have vastly different price tags. Whether you're a prospective buyer aiming to make the most of your budget or a seller looking to maximize your property's value, this post will provide crucial insights that add context to the price your realtor recommends listing your home for.
1. The Home’s Location
One of the biggest factors that impact a home’s price is location. When it comes to home values, location isn’t just about geography, but also the finer details of the home’s neighborhood, amenities, and surrounding amenities.
Firstly, a home’s neighborhood alone has a lot of sway in its value. Neighborhoods that are perceived as “good” will inflate home values, while “rougher” neighborhoods will have the opposite effect. This effect can usually be attributed to matters of safety and infrastructure, but there are many other pieces to consider.
A neighborhood’s desirability hinges not just on safety and road quality, but also on several other aspects that can make an area “desirable.” These aspects can include tax rates, school districts, amenities, infrastructural strength, weather, and even average income. Proximity to major cities tends to drive home values up, for example, because large cities offer an array of amenities that may be harder to find in rural areas.
If the home is located near shopping centers, grocery stores, and entertainment venues, it is likely to be on the pricier end. The same home located in a rural area may be more affordable, as the quantity and quality of these venues may be less. While these factors are extrinsic to the home itself, they are intrinsic to the life you can live while owning it.
School districts are also a major variable. Homes that are located in good school districts are very desirable for families, but they also tend to come with higher price tags and higher local tax rates.
2. Characteristics of the Home Itself
While location is a major factor, there is no more important factor than the home itself. The number of bedrooms and bathrooms can drastically affect a home’s price, and its overall square footage is a major variable, too.
When people shop for homes, the first thing they consider is often the size and layout. In a time when all homes are listed on aggregators like Zillow, buyers can immediately filter out homes that don’t have an adequate number of bedrooms and bathrooms. The ability to filter by size immediately eliminates certain homes from consideration.
Beyond just size, there are plenty of other factors of a home that influence its value. Age, quality of building materials, and energy efficiency are variables that buyers weigh heavily. While energy-efficient homes may cost more upfront, many buyers recognize that a higher monthly payment may ultimately be more affordable than a low monthly mortgage payment with high utility bills.
Old homes also tend to need more repairs and renovations than newer homes, which tends to drive prices downward. High-quality materials, like marble countertops and vinyl plank flooring, are more durable than their cheaper counterparts are can increase a home’s value due to their long-lasting nature.
3. Temporary Market Conditions
While a home’s specifications are intrinsic to its value, there are many other factors that can ebb the property’s worth. Market conditions are constantly changing, and they can sway a property’s value by as much as 100% or more.
When interest rates are high, buyers tend to exit the market. This decrease in demand tends to drive prices downward. The opposite effect occurs when interest rates are low.
Similarly, when the economy is booming, house prices rise. However, if unemployment starts to creep up and the economic outlook becomes more dire, the ability and desire to spend on houses tend to drop.
4. Sales Price Trends Within the Home’s Neighborhood
Another major factor in determining a home’s price is the trend of the values of other similar properties in the area. Regardless of broader economic conditions or interest rates, local property values tend to move in unison. If houses in a neighborhood start to sell for higher prices, all of the homes in the neighborhood tend to appreciate in value. Meanwhile, if some sellers opt to sell their houses quickly below market value, it can play a toll on other home’s values in the neighborhood.
5. Appraisals and Inspections
These factors tend to influence a home’s price later on in the negotiation phase. Before buying a home, it is crucial to have it inspected for potential repair needs and structural issues. On top of that, many mortgage lenders require homes to be appraised before they will issue a loan.
These inspections and appraisals can really set the tone for the ultimate sale price of the home. If the inspection detects structural issues or mechanical failures that need to be addressed, the seller may have to cede a bit on the price. Similarly, if the appraisal value comes in below or above the listing price, it may shift the sale price by thousands of dollars.
Unfortunately, these aspects are out of the control of the seller. A good inspector is able to find just about any flaw that a home may have, and these flaws often need to be addressed – either via repair or reduction of the asking price – before a transaction can go through.
6. Time of the Year
The final major factor that can influence a home’s price is seasonality. The time of the year can significantly alter the price of a house, as supply and demand for personal real estate tend to follow a predictable pattern each year. Supply peaks in the spring and summer and tapers off by winter, and demand is often at its highest right at the beginning of summer.
This seasonality is driven by several things. For families, the best time to move is often over the summer when kids are on summer break. It is much easier to switch schools at the start of the school year than several months in.
These patterns are consistent and predictable. However, not everyone has the flexibility to shop for homes during the low season. Beyond that, when supply is low, the chances for a buyer to find their dream home are also much lower than they are in the summer months when the market tends to boom.
If you visit Myrtle Beach or any other place in South Carolina and fall in love, we’re here to help. We at The Boyd Team are committed to helping you find the right property for your needs and dreams. Any question that you have about moving to the area and finding your dream home by the beach is our pleasure to answer. Feel free to send us an email at eddie@boydteam.com or text or call us at (843) 222-8566, and we will get back to you as soon as we can. Being true natives of the Grand Strand and Horry County and with over 25 years of experience in the local real estate market, whether buying or selling, we can help you make your dreams a reality.
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