There is good reason behind the real estate catchphrase “location, location, location”. When it comes to determining property value, your home’s location is one of the most important factors.
A “good” location can be determined by dynamics as broad as the economic stability of the community or as specific as to where the home is located within a certain neighborhood. A great house in a poor location can knock a significant amount off the value.
Community, City or Town Dynamic
When determining a good location, you can start by looking at the community, town or city in which a home is located. A community with a viable economy and healthy mixture of residential and commercial districts provides residents with job opportunities and revenue to maintain roads and city services. Communities, towns and cities that are well-maintained boost a sense of community pride, upping the value of homes in that area.
Local Neighborhood Dynamics
“Local neighborhood” refers to the residential area and surrounding necessities of a home, such as grocery stores, gas stations, hospitals, public transportation, etc. Homebuyers are looking for quality and conveniences, including what school district might come along with a certain home purchase.
Even buyers who don’t have school-age children benefit greatly from buying a home in an upstanding school district, as those schools ensure a consistent demand for properties with higher values. A 2013 Redfin study found that buyers are willing to pay $50 more per square foot for homes in high-rated school districts than homes in average-rated school districts.
Residential Neighborhood Dynamics
Homes with the highest values within a neighborhood are usually located in the middle of the block or in a cul-de-sac and surrounded by other homes similar in size, style and age. For example, a neighborhood saturated with rental properties can decrease surround home values by as much as 15 percent.
Value-wise you’re likely better off having an average house in a great location, than having the best house in an poor location.
When looking to buy a home, remember to look beyond the house itself. Physical structure depreciates over time and aesthetics can be changed, but a home in a great location will give you a significant advantage for a profitable resale.
Looking for more information on buying and financing a home? Our Mortgage 101 Handbook is the ultimate guide for first-time homebuyers.