The Top Things Dragging Down Home Values

Allen Shayanfekr |

A house serves as the centerpiece to everyday life as well as the backdrop to years of creating memories. This is what makes it a home. For those who participate in the residential real estate market, a house is a hard asset, which in turn, makes it more of an investment – possibly the largest some will ever own.

And while low taxes, good schools and proximity to public transportation are likely to boost property values over time, there are several factors that drag down home prices regardless of zip code. With that, homeowners should be aware of these issues, fix them when possible, and be prepared to sell their homes at a lower price if they cannot be addressed.

On a macro level, market conditions often dictate price direction. A growing economy, consumers’ confidence about their job prospects and low interest rates spark demand for home purchases. Conversely, an economic downturn, rising unemployment and an inability of prospective homeowners to secure mortgage financing all lead to a shaky real estate market as demand weakens. In fact, the total value of all U.S. homes dropped by $6.4 trillion between 2006 and 2012 as the country struggled with the lingering effects of the Great Recession. While home prices have rebounded, reaching a record $29.6 trillion in 2016, several market watchers are signaling the U.S. may be facing a housing bubble amid expectations that market fundamentals won’t be able to sustain current price levels.



On a more local level, several factors can push the housing market lower, starting with problematic activity in the neighborhood. And nosey neighbors and barking dogs could be just the tip of the iceberg. Foreclosed properties drag nearby home values down, both in terms of appraisals and homebuyer perceptions about the stability of the neighborhood. While some foreclosure sales are done quickly, other properties linger for years. With little to no upkeep, these abandoned houses eventually become eyesores with the potential to attract all sorts of unsavory characters, from mice and raccoons to squatters and neighborhood riff raff. And along the lines of creepy elements in the neighborhood, registered sex offenders need to live somewhere, and much to the chagrin of nearby homeowners, property values go down because of them.

And speaking of creepy, houses located near a graveyard are often discounted.

More generally, bad property locations drive prices lower. Proximity to a busy intersection, city dump or funeral home are just a few of the many things that turn off homebuyers.

Lastly, the physical condition and features of a house are vital to assessing its value. And for homeowners looking to sell, addressing aesthetics, structural integrity and the housing demands of modern families before listing a house are some of the things they can do to ease price constraints from not maintaining their property.

The easiest home improvement should of course be curb appeal. A fresh coat of paint, landscaping and deck staining are just a few things homeowners can do to improve the appearance, and worth, of their homes. Interior painting, updated plumbing, electric and telecom, and new flooring, are options sellers should consider to differentiate their properties and boost values.

Some improvements require decidedly more work, and unless the property is destined to become a knockdown, addressing foundation, water-seepage and other structural issues before a house hits the market is a good way to preserve value.

Finally, one of the biggest things dragging down home prices are small, outdated kitchens and bathrooms. Today’s homeowners seek open, visually appealing spaces and are increasingly particular about these rooms. Renovating kitchens and bathrooms helps home sellers competitively price their properties, while affording the opportunity to recoup much of their investment.

Those considering selling their home in the near future would be wise to make any of the improvements that apply in order to fetch top dollar in a competitive market. On the flip side, prospective buyers may also want to keep these factors in mind to be sure they’re not paying more than they should only to have to make costly renovations down the line.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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