What Is Home Appreciation? (2024)

What Does Home Appreciation Mean In Real Estate?

Home appreciation relates to a house orinvestment propertyincreasing in value over time. Increasingproperty valuecan lead to bigger profits when selling or increased monthly rental income for investors.

Higherhome value can translate to moreequityin a home. Home equity is the difference between what you owe on your mortgage and what your home is worth. It represents, in dollars, the portion of the home you own outright. If you ever need cash, you can access this money through different loan and refinance options.

Home Appreciation Vs. Depreciation

As the names imply, home appreciation and depreciation are opposites. While appreciation refers to an increase in home value, depreciation refers to a decrease.

Several factors can lead to home depreciation. And like home appreciation, some factors – the housing market, the location of the home and neighborhood developments – are out of your control. Other variables that can lead to home depreciation include the home’s age and condition.

To maintain or minimize the decrease in a home’s value, homeowners can focus on regular maintenance, renovations and upgrades inside and outside their houses. Keeping up with the latest local real estate market trends should help you make strategic property improvements.

What Is The Average Home Appreciation Rate?

Home appreciation rates have increased year over year to 5.5% as of February 2024. But it’s important to note that appreciation doesn’t happen in a vacuum. Homes are in constant states of depreciation unless regularly maintained or renovated.

Appreciation rates can also fluctuate drastically due to changes in the housing market, so the current rate of appreciation doesn’t necessarily reflect future value.

What Factors Affect Home Appreciation?

A range of factors can affecthome appreciation. Some are within a homeowner’s control, and others can be harder to predict. The most common factors that impact home value include:

• The housing market:Thehousing marketcan affect a home’s appreciation. Supply and demand play a critical role in appreciation In a seller’s market, home appreciation will increase. A buyer’s market may lead to home values plateauing or decreasing over time.
• Location:The location of a home will impact its appreciation. While the national average can be a good indicator of overall trends, localized data displays how real estate appreciation can vary between cities, neighborhoods and property types.
• Interest rates:Interest rate trendsaffect appreciation due to their impact on prospective home buyers. Low interest rates typically motivate buyers to buy now, which pushes
• Home improvements:Home improvements and renovations can have the most significant positive impact on your home value over time.

How Is Home Appreciation Calculated?

The simplest way to calculate home appreciation is to divide the change in the home’s value by the initial cost. You can multiply the result by 100 to calculate the change as a percentage.

For example, let’s say your home was valued at $200,000 when you purchased it, and its market value increased to $225,000. That’s a value increase of $25,000.

To calculate the appreciation percentage, we divide the change in home value ($25,000) by the original home value ($200,000), which equals 0.125. By multiplying 0.125 by 100, we can determine that the home’s value has appreciated by 12.5%.

If math isn’t your friend, the Federal Housing Finance Agency has aHouse Price Calculatoryou can use.

How Can You Add Value To A Home?

Are you searching for thefactors you can control that willincrease your home’s value? Home improvements, upgrades and renovations are the most surefire way to encourage home appreciation.

• Exterior and interior upgrades:Enhanced curb appeal can go a long way toward adding value to a home, but interior renovations are equally valuable. If your home looks run down or outdated, it may be time to invest in some upgrades that can make your home easier on the eyes and easier to sell.
• Increased energy-efficiency:Making a home more energy-efficient can increase the property’s value and decrease your monthly energy costs. One of the most popular energy-efficient upgrades issolar panels.
• Increasing square footage:Increasing a home’ssquare footagecan also increase its value. Consider adding a deck or building an The more square footage a home has, the more value it can hold.

FAQs About Property Appreciation

Home appreciation is as important to understand as it is complex. Let’s review the most frequently asked questions homeowners have about property appreciation.

How much does a house appreciate per year?

A home’s annual appreciation depends on the national appreciation rate, which is heavily impacted by fluctuations in the housing market. For the most accurate information, research appreciation rates in your area.

Do manufactured homes appreciate?

Manufactured homespermanently affixed to land (real property) historically appreciate at the same market rate as traditional stick-built homes, so you won’t have to worry about sacrificing future value if you choose this form of affordable housing.

What is the average home appreciation in the U.S.?

Home prices rose 6% in January 2024. While prices are expected to continue climbing in many areas, some markets have seen price decreases. A lot of this variation can be attributed to local housing market conditions and location.

The Bottom Line: Take Steps Toward Positive Home Appreciation