If you’re interested in purchasing a home, it’s important to understand what home features can cause your home to appreciate in value. This will open up more options you should you ever feel the need to sell, or market your home in some way.
When factoring inflation and population growths, standard home values typically appreciate 3% to 4% annually. 2016 was an exceptional year as homeowners saw their values rise to an average of 6.3%.
To help account for these growths, a team of researchers from realtor.com® analyzed millions of listings to calculate the annual price growth of homes with specific features. The research was conducted on homes listed from 2011 to 2016 and here are their findings:
Small homes: Homes smaller than 1,200 square feet appreciated by an average rate of 7.5 percent a year for the past five years. On the other hand, larger homes of 2,400 square feet or more rose by 3.8 percent a year. The smaller-home demand is being driven by millennials wanting to enter the market with a more affordable starter home and baby boomers who are looking to downsize, realtor.com® notes. Further, smaller homes are in shorter supply, which is prompting prices to increase more due to the high demand, says Jonathan Miller, president of Miller Samuel, a real estate appraisal firm.
Two-bedroom homes: Homes with two bedrooms appreciate at a rate of 6.6 percent a year, compared to homes with five bedrooms that appreciate at 4.3 percent a year, realtor.com®’s research team found.
The Hottest Home Features
(Noted below with the annual appreciation rate from 2011-2016.)
- Open floor plan: 7.4%
- Patio: 6.8%
- Hardwood floors: 5.7%
- Fireplace: 5.3%
- Finished basement: 4.6%
- Hot tub: 3.9%
- Stainless steel appliances: 3%
- Granite countertop: 2.5%
Open floor plans: Homes with open floor plans appreciate 7.4 percent a year. It’s the hottest appreciating home feature that realtor.com® studied (see side for full list). As for features like stainless steel and granite, Miller says those amenities don’t really add any value to a home. “Those are what I call ‘have-to-have’ features,” Miller says. “A home needs to have them in a competitive market. But they don’t add long-term value. … Ten years from now, when you update your kitchen, they’ll be replaced.”
Modern and contemporary homes: Modern and contemporary architectural styles have the highest potential for appreciation, increasing at about 7.7 percent annually. This style of home is known for simple, geometric shapes, and large windows. Newly constructed modern homes also tend to be energy efficient. Bungalows and Traditional are the next highest appreciating styles at 6.5 percent and 5.6 percent, respectively. Meanwhile, niche styles like Craftsman bungalows and Victorians are among the lowest appreciating architectural styles, at 3.7 percent and 2.2 percent, respectively. Researchers speculate that may be due to some of the maintenance responsibilities in staying true to the home’s historical architecture that is often connected to these styles of homes.
Green space views: Homes with a park view appreciate at 7.9 percent a year, realtor.com®’s research team found. Homes with mountain views appreciated on average by 5.1 percent, and homes with a lake view at 4.9 percent. Ocean views appreciated the least of the “home views” studied, at just 3.6 percent a year. Recent storms may have spooked buyers from oceanfront properties as well as the fact that the highest-cost homes tend to be along the ocean, realtor.com®’s research team notes.
I hope this helps you to understand a bit of how, or why, certain homes tend to appreciate more than others. If you are interested in a purchasing a home or even looking at a particular investment, I’d definitely be open to chatting with you. Not all homes are created equal, and there are a multitude more variables to consider. Let’s talk about it!
Source: “Appreciation Sensation: The Real Factors That Boost Your Home’s Bottom Line,” realtor.com® (April 17, 2017)