Introduction
You must wonder why these house prices are all so expensive. You’re about to find out why, mainly through the following factors:
- Comparables
- Location
- House Size, Square Footage, & Usable Space
- Age & Condition
- Upgrades
- Economy & Market
- Neighbours
Comparables
Comparables or comps are prices of recently-sold houses that are a similar size within your neighbourhood. It can be used to get a rough estimate of how much a house in your desired area will be worth.
Location
Location is where your house is. Mainly, whether your house is near good schools, employment centers, and amenities & entertainment. Other factors that make a location ideal are how close they are to highways, utility lines, & access to public transit.
House Size, Square Footage, Livable Space
House size is how big the house is. More importantly, the usable space within that house is another key factor. A home’s value is roughly estimated in price-per-square foot, which is the sale price divided by the home’s square footage.
Usable or livable space is the square footage that excludes house areas such as garages, attics, & unfinished basements. Examples of usable space are bedrooms and bathrooms. The more usable space there is, the higher the house value depending on the area.
Age & Condition
Newer homes tend to be worth more. This is because newer house components, such as plumbing, electrical, roof, & appliances save buyers money from having to fix or replace them. Many buyers are willing to pay good money for move-in ready homes. After inspections most buyers perform negotiate repairs to avoid major expenses after buying their house.
Upgrades
Certain upgrades are attractive to home buyers. NARI members created a recovery project cost percentage to compare dollar value to estimated cost of each upgrade job.
The following are recovered costs for interior projects:
- 147% – refinished hardwood floors
- 118% – new wood flooring
- 100% – insulation upgrade
For exterior projects, new roofing and a new garage door both recovered 100% of the project costs.
The Local Market
The market is determined by how many houses are for sale and how many buyers there are. A seller’s market is when the number of buyers is more than number of houses for sale. In contrast, a buyer’s market is when there are more houses for sale than the number of buyers.
The Economy
The general economy affects housing markets. More job or pay growth makes it easier to afford a new house. The opposite is also true. It’s usually best to buy when the economy’s poor, and best to sell when the economy is doing well.
Interest Rates
Interest rates influence how affordable houses are. For those with variable-interest mortgages when interest rates go up it makes the mortgage more expensive. If they go down, it makes the mortgage cheaper.
Neighbours
Generally, people prefer quiet, respectful neighbours that take good care of their property and don’t attract trouble. Neighbours like this raise the value of your home. In contrast, poor neighbours will bring down the value of your house.
Summary
Chances are the importance of these factors is out of order for you. How would you order them? Maybe there are some factors driving the price of houses up that were totally missed. What are those factors? Leave a timely comment below with your answers!
