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Understanding real estate appreciation
Real estate appreciation refers to an increase in value of your home and property. When your property
"appreciates" you have greater equity against which to borrow, and you realize a greater profit when you sell. In the past 12 months, there has been very little appreciation and, in fact, on a national level real estate has depreciated 17-20% or more.
But all real estate is local and that is never more evident than here in Greater Cincinnati and Northen Kentucky. There are still communities that are "hot spots" while there is an abundance of inventory in others.
By and large, the economy is the driving factor of real estate appreciation in the U.S. That includes interest rates as well as the current employment rate, business growth in the area, housing supply and demand and affordability. We have all been "over exposed" to the economic news so it will come as no surprise that real estate is not appreciating at the same rate as it did just 12 months ago. But as the Greater Cincinnati area did not see the extreme increases in value, we have also not seen the extreme depreciation.
Regional economic and social factors also affect real estate appreciation.
Many homebuyers choose to live in areas with the best and most convenient features for households to thrive, such as a close proximity to schools, jobs and commerce.
A good school district can also be an indicator of good home appreciation. It is believed that good schools help foster lifestyles associated with high levels of attainment at the individual, household and community level.
 Demographics also play a role in real estate appreciation. For example, during the 1980s, much of the baby boomer generation (people born between 1946 - 1964) was buying real estate, causing homes to appreciate at a faster rate than inflation and made real estate a profitable investment. The group referred to as Generation Y born roughly between 1980 and now is the biggest generation since the baby boomers. Their contribution to real estate is expected to be far greater than their older siblings of Generation X (born between 1965 and 1979).
There are some aspects that significantly contribute to real estate appreciation, which you may want to ask me about when shopping for a home:
Recent sales. I will provide you with recent real estate sales in the neighborhood you wish to live in. How many home sales have there been in the past year? What are the asking prices? What is the asking price to final sales price ratio? How much inventory is out there and what are the average Days on Market. These will all help to determine a homes value and a negotiating strategy.
Appreciation history. Have home prices risen or declined over the past 5 to 10 years? How about in the last 12-18 months. Is the neighborhood considered desirable because of its location, amenities or affordability?
Local business economy. Is there a good mixture of business or does the area rely on one industry? Have any new industries moved into or out of the area? Is there a lot of new development nearby? Economic changes such as a large factory going out of business can dramatically affect demand for housing in a particular area.
It is important to note that while appreciation is nice to have, it should not be the reason you decide to buy a home in a particular area. Even if you buy a house in a rapidly appreciating area, there is no guarantee that its value will rise by the time you want to sell it. That's why its best to pick a neighborhood and a home in an area that suits your own needs.
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