The Realty Geek's Blog

How to Predict the Resale Value of a House

People come in two flavors: those who live for today and those who consider tomorrow. Some folks see only what’s right in front of them while others consider the big picture. We are either nearsighted or farsighted. Okay, some of us have 20/20 vision, but even that only means one has clear vision to a distance of 20 feet.

So, into which camp do you fall? If you’re in the market to purchase a home, and you tend to be impulsive, you might want to take some lessons from the big picture folks. Spontaneously living in the moment is great, as long as you allow the future to intrude, even for just a moment.

Our biggest concern when faced with the home purchase contract is, naturally, price. Is this house priced correctly for the current market? Am I being overcharged? Can I get a deal? With your nose firmly placed in the home’s current value, you may be neglecting something equally as important: its future value.

Now, until someone invents a foolproof, bona fide crystal ball, the true answer to anything that may happen in the future remains elusive. But even a modicum of research may give you some clues.

Factors that May Determine Future Value of a Home

Calculating resale value isn’t an exact science. Multiple factors determine the value of houses on the market at any given time. Some of these you can’t control, such as the national economy or supply and demand.

There are two main predictors of future value: location and land values.

“Location, location, location” isn’t just a trite real estate-ism. The location of a house has a huge impact on its value. From its place within a city or town to what type of street it sits on, location is almost everything. As long as people have children, houses on cul-de-sacs will hold value better than those on busy thoroughfares. By the same token, homes near exceptional schools are more in demand than those in poor school districts.

Land will never be subjected to the supply side of the supply/demand formula simply because it’s a finite resource: We can’t manufacture more land. Demand for land may fluctuate, according to how usable the land remains. And while land value typically appreciates, the condition of what sits on it, the house, may either depreciate the land’s value or make it more desirable.

What to Consider When House Hunting

Whether you’re the type of person who is fueled by emotion or a more calculating soul, the most important thing to remember, if you’re concerned about the future value of a house you’re considering purchasing, is to remain emotionally detached and to do some sleuthing.

  • Look beyond the “oh-it’s-so-cuteness” of the house and concentrate on its location.
  • Check with the city or county planning office to get an idea of any future land use plans. Will traffic be rerouted through your new neighborhood? Are there plans to develop a big-box retailer-anchored shopping center on that vacant parcel across the street?
  • Check out the neighbors. Neighborhoods with younger occupants tend to be more in demand than those primarily populated with retirees.

While there are certainly ways to improve the value of a house before placing it on the market, if you start thinking about selling the home even before you buy it, you’ll end up ahead of the game before the game even starts.

Comment balloon 5 commentsEric Proulx • January 05 2012 07:07PM

Comments

Very interesting Eric. Thanks for posting today. - David

Posted by David Burrows, No Pressure, Just Seriously Devoted to Real Estate (Classic Realty) almost 7 years ago

Great points on the two main predictors of home resale value. location and land values.

Posted by go to RealEstateFaster.com & get 20 Listing Appointments per month (Real Estate Faster) almost 7 years ago

Eric:

Buyers like cute but need to think about other factors in the home they buy which will make it more attractive when they decide to sell their home.

Posted by Evelyn Kennedy, Alameda, Real Estate, Alameda, CA (Alain Pinel Realtors) almost 7 years ago

Eric,

It's all true!  It amazes me how location still makes a solid investment.  I was just visiting my mom in Bethesda this weekend and the home next to her sold for higher than what she bought her home for 4-5 years ago.  I wasn't expecting that with all the bad news everywhere.  Interesting!

Posted by David Artigliere, ARTI Home Inspections, ASHI Certified Home Inspect (Reading, Pottstown, Norristown, Philadelphia) almost 7 years ago

I know! The old saying, Location, Location, Location still holds true even in these rough times. Thank you so much for the positive feedback!

Posted by Eric Proulx (RealEstate.com) almost 7 years ago

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