April 19th, 2017 7:39 AM by Jackie A. Graves, President
The galloping real estate market is a scary and exhilarating
the one hand, as home prices soar, how on earth will you ever buy one? On the
other, assuming you do pull off the biggest purchase of your life and become a
proud homeowner, those very same rising prices are a promise that one day you,
too, will make bank.
that's exactly why savvy buyers and owners obsess about how much their
home will be worth in a few years—and why.
Will a bigger or smaller abode appreciate most in a few
years? Are those granite countertops and fancy-shmancy stainless steel
appliances really worth splurging on? Or would it be better to add on a patio
inspired by Architectural Digest spreads? And if you're planning on
selling, down the road, should you pay a premium to live near public
transportation—or the top school districts?
you get better ROI on a ranch or a Victorian? Two bedrooms or four? Hot tubs or
it's enough to make you reach for the anti-anxiety meds. The trick, of course,
is to do everything you can to ensure that your home appreciates above
market rate—or at very least retains its value. And that's where we at
realtor.com® come in.
economy is strong, a home's value generally increases 3% to 4% every year,
driven by inflation and natural population growth. From 2011 to 2016, the
national housing market was recovering from the bubble at a slightly higher
speed: 6.3% a year, on average.
find out what will boost a home's value the most, our data team took a deep
dive into millions of listings on realtor.com from 2011 to 2016, and calculated
the annual price growth rate of homes with particular
features. Admittedly, it’s hard to separate one feature from
a home and single it out as the reason for
price appreciation. But when we crunched a lot of data and compared one
feature with another, we found some useful—and sometimes
Stay calm, we've got you covered! Let's get into the price appreciation
may dream of walk-in closets, a roomy master bedroom, and a three-car garage,
but bigger isn't always better. Turns out the smallest homes actually
appreciate the fastest: Homes of less than 1,200 square feet have appreciated
at 7.5% a year for the past five years. Meanwhile, homes larger than 2,400
square feet only inched up 3.8% a year.
demand for smaller homes is driven by the two largest and most influential
groups of buyers: millennials and baby boomers. Millennials are entering
the market hungry for more affordable starter homes, and boomers are seeking to
coincides with the trend bringing buyers back into city centers, where every
extra inch is a luxury. Today's young buyers are looking for more
efficient spaces that are just large enough for their needs. Many would prefer
to be close to work, cultural amenities, and fun bars and restaurants.
that they live outside the home—that could mean a coffee shop, bar or
restaurant, or a park," says Jason Dorsey, chief
strategy officer for the Center for Generational Kinetics, a marketing firm in
the supply of smaller homes is limited—housing developers still prefer to focus
on the high-end market, so they can get more bang for their buck.
Furthermore, those who own smaller abodes aren't trading up quickly enough
to meet market demand.
the market [for smaller homes] is tighter, prices tend to increase more
quickly," says Jonathan
Miller, president of the real estate appraisal firm Miller
effect is more pronounced in expensive urban markets like San Francisco
and Denver, where homes of under 1,200 square feet see 17% and 12% price
growth a year, respectively.
not just square footage that drags down a home's appreciation. Multiple bedrooms
have fallen out of favor now that Americans are having fewer kids. So what
would you do with those extra rooms, anyway?
with five bedrooms appreciate at only 4.3% a year, far lower than the national
average of 6.3%. Meanwhile, a cute two-bedroom home appreciates by 6.6%.
converting a garage into a bedroom probably isn't worthwhile, especially since
this is one area where people do want a little more room. Two-car garages are
still the gold standard, offering the highest annual growth, at 6.4%. It makes
perfect sense, considering that an average American household in 2016 had 1.9
cars, according to Nielsen Pop-Facts® Demographics. A one-car garage comes
in next, at 6%, while three-car garages—a luxury amenity—appreciate at just
one thing to prefer a small home; it's quite another to have a home that feels
cramped. How do you make a small space look bigger? Knock down some walls and
open it up! Homes with open floor plans appreciate 7.4% a year.
great thing about an open plan is its flexibility. Party animals of all ages
enjoy having a larger space for entertaining. Parents can safely watch their
3-year-old play while preparing a meal in the kitchen area. Older people who
have mobility issues find it easier with fewer twisting corridors to navigate.
to bridge the indoor and outdoor spaces, a patio is also a worthwhile
investment. There's nothing like putting in some serious summer relaxation
time on your patio or deck—sipping a sweet Pappy Van Winkle Old-Fashioned,
or firing up a grill for al fresco gatherings. Homes with a patio appreciate
6.8% a year.
HGTV bywords, like stainless steel appliances and granite countertops, have
surprisingly little impact on price appreciation—3% and 2.5% respectively.
However, homes with those amenities are relatively expensive to begin with,
which leaves less room for growth.
Miller, the appraiser, puts it, "Those are what I call 'have-to-have'
features. A home needs to have them in a competitive market. But they
don't add long-term value." What's fashionable today
doesn't last forever, and "10 years from now, when you update your
kitchen, they'll be replaced."
elegant Queen Anne homes to humble cottages, architectural styles often reflect a buyer's personal
taste—and budget. We found that the styles resonating with the most
people have higher potential for appreciation.
in modern and contemporary styles are building a loyal fan base,
especially among young buyers. They are known for their simple, geometric
shapes, large windows that fill the space with natural light, and a harmonious
blend of interior design with the surrounding landscape. Plus, more recently
constructed modern homes tend to be more energy efficient. They appreciate at
about 7.7% annually.
architecture is to real estate as Apple products are to personal technology,
says George Hale, owner of
H. Hudson Homes, a builder based in Portland, OR.
only does it look great, but it works well too," he says. "High
ceilings, big windows, lots of light, great space, thought behind design, these
are the things that people appreciate today."
generally refers to homes with classic designs like simple roof lines and
symmetrical windows, along with a welcoming front porch, and often cozy
fireplaces. The style enjoys wide popularity, especially in the South,
because it's homey, practical, and often affordable—its median price is
$230,000. Homes of this kind appreciate at 5.6% a year.
traditional styles, like Craftsman bungalows and Victorians, may tug at the
heartstrings of history buffs, but tend to leave regular buyers unimpressed. The responsibility of maintaining a vintage abode can be
huge—you can't just wander into Home Depot and find
customized doorknobs. And your favorite IKEA furniture will seem like
a horrible mismatch.
Craftsman style is defined by its low-pitched, gabled
roofs, exposed wooden structural elements, and most importantly,
hand-crafted woodwork. A Craftsman home isn't cheap to come by—the median price
is $336,500—and has not
seen rapid growth recently, at only 3.7% a year.
worse, Victorian-style homes, famous for their elaborate decorative trim,
came out dead last in annual appreciation rates, at a measly 2.2%.
importance of location is a cliche in real estate—because it's true. Homes located in the
neighborhoods most in demand really do appreciate faster. After all, you can
gut the inside and paint the outside, but it's not so easy to move a
nice-looking home out of an inconvenient location.
the feature that buyers most want to be close to is public transportation.
Homes near train stations and bus stops appreciate 8.4% every year. They're
usually located in more urban areas and are close to restaurants and shopping
within 10 blocks of a subway station sell the fastest in Astoria, in the Queens
borough of New York City, says real estate broker Paul Halvatzis of Amorelli
Realty in Astoria.
want to roll out of bed, walk to the train station, and hop on a train to
work within half an hour," he says.
near schools, especially schools with keywords like "top" and
"best," also come with an inflated price tag—the median price is
$320,000. That's almost one-third more than the typical home. But plenty of
parents still envision walking to school with their children in the morning.
Homes near the most desirable schools appreciate 7.2% a year.
it's snowy mountain peaks or a glassy expanse of blue water, you'll pay a
premium for those stunning views outside your windows. But some sights bring
more value to your home than others.
most valuable? Homes with a park view appreciated 7.9% a year.
hold value over a longer period of time, and they recover quickly from a
downturn," says San Francisco Realtor Michael Minson at Kelly Williams, who recently sold
a home near Golden Gate Park. "Buyers appreciate the tranquility and
outdoor activities. They like being close to nature."
the other hand, homes with ocean views see little appreciation over time, at
just 3.6% a year. That may be because as much as buyers fancy white sand
and crashing waves, few have deep enough pockets to pay $699,000 for a
home. Recent storms may have scared them off, as well.
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