Dynamics of Home Price Appreciation

For all the stakeholders in real estate transactions—sellers, homebuyers, foreclosed homes and other real estate investors, home price appreciation represent a essential element of the entire buying and selling process. For individuals buying personal residences, buying a home represents one of the biggest financial investments they can ever make—and they want to know if the value appreciates or if they are losing equity.

Defining home value appreciation

.Appreciation is the increase in the value of assets, including stocks, art, coins and real estate. In relationship to real estate , it’s the increase in value –a gauge of the demand for real estate in the area.

Calculate increase or decrease

To calculate the annual appreciation on a property—as compared to the same time a year ago—gather a sample the median or average sales prices for each month over the previous year. Totaled and divide by 12.

Now you have a price point to determine if the price appreciated or depreciated over the prior year.

Why prices rise and fall

The value of a property can fluctuate for a variety of reasons:
• Employment rates
• Interest rates
• Business growth
• Housing stock, supply, demand and affordability

Other factors that can effect home value appreciation are crime rate, weather and other quality-of-life concerns.
Home price depreciation

Prior to the collapse of the financial market in 2008, buying a personal home or foreclosures properties and other residential real estate was consider a “no—brainer- because homes values were going up.

Common thinking believe that even if home prices decreased, any decline would be short-term and prices would trend up again. This was sound thinking based on based on historic price trends up to the collapse.

From 2007 to 2012, homes price dropped an average of 34 percent nationwide and almost 60 percent in some areas. Layoffs, foreclosures and other economic factors cause 4.1 million homeowners to lose their homes, which flooded middle-class neighborhoods with foreclosed homes.

The value of a home can depend on numerous elements, which buyers must consider.

Housing prices and the economy

Rising or falling home values have a significant effect on the general health of the U.S. economy. It also has an impact on the behaviors of households and other factors show up in a number of ways that :
• Homeowners mobility
• Inventory supplies
• Consumer spending

An example of how the “mobility of homeowners” was affected by (falling) home values, lost home equity prevented many homeowners from moving –whether to buy new homes or to sell in preparation for retirement.

Many homeowners have underwater mortgages-they owe more on the loan than the value of the home on the market. As a result, many people that would have moved under better circumstances have stayed in their homes– many could not sell. With the housing market making a recovery, homeowners are now trying to regain lost equity before they sell.

This approach has contributed to the shortages of entry-level and moderately-priced homes for personal buyers and real estate investors. When you add the drop in the number of foreclosures and short-sales—it makes for an inventory shortage, which helps fuel home price appreciation.

Studies have shown that as consumers gain more equity in their homes, they tend to refinance or tale out second mortgages, which puts money in their pockets. They use this money to make home improvements and spend money on durable goods.

Other considerations

Making improvement to the hoe can increase its value—especially remodeled kitchens, hardwood floors, updated bathrooms and master bedrooms enhancements.

Amenities like shopping, cultural activities, schools and entertainment can also have bearing on home value appreciation.

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