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Step 2: Understanding the Market
5 biggest factors influencing values
Excluding the obvious underlying economic conditions which infuence housing demand (interest rates, employment growth, personal income growth, etc.), the following 5 factors drive demand for specific neighborhoods:
- Schools. Even though less than 40% of American households have school-age children, most single family housing demand is created by families. Schools which possess good conditions and high test scores are going to make their surrounding neighborhoods more appealing to buyers. For a list of school achievement scores, click here
- City Appeal and Amenities. Certain cities command a level of prestige through a combination of lifestyle amenities, safety, and association with high-income demographics. These cities have typically seen greater long term appreciation. In addition, certain cities enjoy a fabulous array of culture, recreation, and dining options which create buyer demand.
- Traffic. When comparing home values, keep in mind that homes on quiet streets or cul-de-sacs will appeal much more to most buyers than homes with more vehicle traffic. In addition, appearance of traffic noise can also reduce a home's value.
- Sun Exposure. Dark homes never sell as well as light ones. Look for homes that contain lots of windows and natural light. Back yards with afternoon sun exposure are also very popular.
- Floor Plan. Buyers today favor homes with open kitchens, master bedroom suites, and large great rooms. Since many homes in the coastal areas were built prior to 1980, you may find yourself looking at homes with poor layouts. In general, remember that a typical kitchen remodel can cost up to $20,000 for new appliances, granite counters, custom cabinetry, and wood or stone flooring. When you look for a home some will be updated and some will appear dated. You must account for the improvements not only based on their cost, but the hassle of managing the contractors and the inconvenience of dust and privacy intrusion. Many buyers underestimate the cost of such improvements and end up paying more money in the long run.
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