What to Do if Your Home Is Losing Value
Posted on 12/12/2022 3:14 PM | by NaijaHouses
Many factors contribute to your home's value. Here's what you can do to reduce the chances your home may decrease in value. There are external factors most homeowners have no ability to control, like current housing market conditions, mortgage interest rates and other economic factors. But perspective is key.
Your home’s value matters – it determines what profit you’ll see when you sell and is a major factor in determining your overall wealth.
For those reasons, the idea that your home could be losing value is terrifying. Here’s what you need to know about the reasons your home could be losing value and how current market conditions may play a role.
- Factors contributing to your home’s value.
- Should I worry about my home losing value now?
- What you can do to improve your home’s value.
- Talking to your real estate agent about home value.
The market value of a home is the price a buyer would be willing to pay at that moment in time. An appraised value is considered a snapshot of a home’s value at a specific moment in time.
Just about every detail in and around your home contributes to its overall value, combined with plenty of outside factors. For more information, check out the Guide to Understanding Home Value.
If you’re worried your home is losing value, think about these contributing factors first:
- Condition of the home, inside and out.
- How do the size and condition of the home compare to others nearby?
- Design features that make your home unique, for better or worse.
- Location of the home.
There are external factors most homeowners have no ability to control, like current housing market conditions, mortgage interest rates, and other economic factors. When it comes time to sell your property or otherwise get a valuation, however, homeowners should worry most about how the above factors fit into the context of the uncontrollable factors in the market.
No matter what, homeowners are likely to fret over the larger housing market and home prices, and whether it will impact the value of their own homes.
After two years of rapidly increasing home prices, the market has slowed. High-interest rates combined with high prices have placed a crunch on affordability and many buyers have opted not to purchase right now. Houses that are on the market are experiencing a modest increase in the average days on market and the year-over-year increase in home prices has slowed.
But perspective is key. “We can’t talk about the slower market growth without talking about last year’s growth, which was really an anomaly,” says Anita Mutumba, associate real estate broker in the District of Columbia metro area for Houwzer, a real estate brokerage with offices in multiple markets across the U.S.
In 2021, home prices increased 16.9%, according to the National Association of Realtors, the strongest price appreciation on record for homes. That growth has significantly slowed, but prices are still higher than the year before: Redfin reports the median home price in the U.S. in September was $403,797, a 7.6% increase compared to September 2021.
The most dramatic change in data points for the housing market has been the decrease in the number of deals taking place. September saw more than 23% fewer deals taking place than in September 2021. The fact that there are so many fewer deals means it’s unclear if prices will drop as a market correction to more accurately reflect true home values, if prices will plateau for a period of time or if prices – and thus, values – will continue to climb, if at a slowed pace.
“There are not enough sales to measure if there’s really a reduction in price or if there’s just a wait-and-see period,” Bishop says.
Separate from the current state of interest rates, some parts of the U.S. may experience a greater decline in home prices than others in the coming months or years. The places most likely to see a continuous decline in home values, however, are pockets where a major employer has closed or relocated and residents subsequently move elsewhere in search of jobs.
There are plenty of things homeowners can do to ensure their home’s value remains on par with similar properties nearby. Here are a few tips from experts:
- Keep your kitchen and bathrooms current. There are a few rooms that can sell a home, and those same rooms can leave it sitting on the market if they’re outdated or poorly maintained. “More than likely it’s going to be your kitchen and your bathrooms,” Mutumba says. Update appliances when they break, make sure plumbing is in good working order, and clean regularly, to avoid stains or dirt, and mold buildup that can have a lasting impact on the look of the space.
- Check your house’s major systems. Your home’s heating and cooling, roof, plumbing, and electrical are imperative to making your home run well. These major systems aren’t as flashy as a new kitchen countertop, but they are a dealbreaker for many homebuyers. Mutumba advises having these systems serviced regularly, and knowing the condition before you list the property. Bishop agrees: “If that house was (worth) $100,000 with a new roof, it might be $90,000 if it needs a new roof.”
- Care about curb appeal. Anyone trying to sell their home or have it newly appraised for any reason should take stock of the outside of the house. Fix any peeling or cracked paint, rake leaves and mow the lawn, consider planting flowers and maybe even give the house a fresh coat of paint. With curb appeal, what’s most important is how your house compares to the rest of the block. “If the yard’s unkempt and it just doesn’t show well, and all the other houses on the street are, that's what (buyers) compare to,” Bishop says.
- Acknowledge design flaws. Some design features make a house stand out to buyers, and not in a good way. Unfortunately, they’re not easy to fix. A third bedroom could be too small, or the kitchen could be on the second floor. You don’t have to spend more than $100,000 fixing the problem – which you likely won’t fully recoup in the increase in value – but you should accept that the design of the home means it’s worth a little less and was, to begin with. Your house with a small bedroom, for example, is viewed as less desirable than similar houses with larger bedrooms. “They’re stuck with it, and they have to accept that people will pay less for it,” Bishop says.
If you’re considering selling your home, you want to have an honest conversation with your real estate agent about the realistic value of your home. That value will help you determine your asking price.
In today’s shifting market, Mutumba says sellers and agents have to pay close attention to only the most recent deals. “Do not rely on comps from more than 90 days ago, because that’s not going to apply to what you can expect,” she says.
If there are issues in your home that could impact your home’s value and what a buyer is willing to offer, your real estate agent will make suggestions. Often there are simple cosmetic updates to make, like a fresh coat of paint throughout the house or professional staging. Sometimes there are bigger changes like a bathroom remodel or new HVAC. The changes you make ahead of a sale shouldn’t completely transform the house, though.
“Unless it’s a complete gut job, I never advocate for a seller to completely renovate a house, that’s not advantageous for them,” Mutumba says. If that’s the case, you’d be better off living in the house and enjoying the renovation yourself for a few years.
Source: Realestate.usnews.com