Appreciation Rate for Houses: How Does It Work?

Appreciation Rate for Houses: How Does It Work

Table of contents

Much like a good wine gets more valuable with age, most properties do too. Much of the appreciation that a property sees is due to the location more than the physical building, the house itself does matter. Let’s take a closer look at what the appreciation rate for houses is and how it works.

Key takeaways

  • Home appreciation refers to the increase in value of a property over time.
  • The average rate for home appreciation historically ranges between 3 and 5% annually, but it can be influenced by local economic factors and lending interest rates.
  • Maintaining the property, considering the neighborhood, and not overvaluing are important factors in keeping the appreciation rate for houses high.
  • Calculating home appreciation can be done using a formula or online calculators, and contacting Hero Home Programs™ can provide expert help in the home buying process.

What is home appreciation?

Home appreciation refers to the value of property increasing over time. When purchasing a home, finding a house that will appreciate in value is the goal, as ROI from property appreciation is how wealth is built in real estate. As equity builds, appreciation adds to the value of your investment.

appreciation rate for houses

 

What is the average appreciation for houses?

Historically, the average rate for home appreciation is between 3 and 5% annually. However, this rate can be markedly different from the national average in certain metro areas, dependent upon economic influences. Local economic factors can sometimes affect the appreciation numbers in neighboring communities and also impact the national average as a whole. Appreciation can also be affected by lending interest rates and the increased demand for housing.

 

Is there a difference between appreciation and inflation?

Appreciation and inflation are two entirely different concepts. Appreciation refers to the increase in the value of a personal asset (especially property), while inflation refers to an increase in the price and cost of goods or services and is not tied to inherent value. In terms of personal finance, increasing appreciation is considered good; inflation is generally not.

 

How does appreciation affect purchases and sales?

For the homeowner, appreciation is a positive metric driving the sale of their home. If they have built equity, they will see a substantial ROI when selling their house. For a homebuyer, appreciation is a mixed bag—they will have to pay a higher price for a house, but if the neighborhood and community are part of an appreciating area, they can also expect to see their investment grow after purchase.

 

Calculating home appreciation

There is a basic formula for calculation home appreciation: A= P x〖(1+R/100)〗^n. In this formula, A represents the value of the house after n years, P is the purchase amount, R is the annual percentage rate for appreciation, and n is the number of years after purchase. You can plug in the numbers and solve for A. However, a simpler solution is to find an appreciation calculator online and input the values–there are several to choose from.

 

How do you keep the appreciation rate for houses high?

To protect your investment, it is important to keep appreciation values high on your property. Barring catastrophic economic events, it is possible to have a solid level of control over the numbers if you invest wisely. Keep the following in mind when purchasing a home, and appreciating values should follow.

 

Maintain the property

After the initial research into buying a home, the most important way you can assure appreciation of your investment is to keep your house and surrounding property well-maintained. Priority must be given to preserving the home’s structural integrity by scheduling regular service checks for plumbing, HVAC, and pest control. Lawn care, landscaping, and cosmetic appearance (fresh paint, weatherproofing, improvements) are also important. Even in the best of neighborhoods, a ramshackle house will not sell for close to its inherent value.

 

The neighborhood matters

When purchasing a home, location is the most important factor to consider. The value of a property is what appreciates, not so much the structure itself. While maintaining your house is an important way to ensure that it doesn’t depreciate sharply and take away from the property’s overall appreciation, the location is the metric that drives appreciation. Don’t neglect to research the neighborhood itself, as well as the surrounding communities. Keep in mind that homes near good schools tend to do well, as do homes in up-and-coming neighborhoods or near areas scheduled for major development (for example, a new planned community or town center). A general rule is to look for places that are near thriving communities where people want to be.

 

Don’t overvalue

Don’t offer more than market value. Market value is the figure that the fully informed buyer would pay for a home, based on what has been paid for similar homes in the surrounding area. These are called “comparables.” A real estate agent will have an excellent grasp of comparables in the area, as well as a good idea of the location desirability, and can steer your offer accordingly. Overvaluing a house is a mistake, be sure to have the home appraised. By paying too much, you can find yourself underwater on your investment, especially if the housing market is volatile.

 

Contact us today!

Buying a home is an investment in your future and when you invest in a property that will appreciate over time and give you a return on your money, you are investing wisely. For help with the home buying process, including experts in home appreciation, contact Hero Home Programs™. They partner with local experts who can help you make the right choices in your home buying journey.

Picture of Jacquelyn Sublett
Jacquelyn Sublett

I love teaching and writing on real estate, finance and mortgage topics. I find it fulfilling hearing stories of first time home buyers who we have helped with the home buying process. Writer for the Hero Homebuyer Programs™

Connect with the Author:

Recommended Posts

What Our Buyers Think

Jules S.
Read More
"5 star service is what you will get when you work with him!ᅠ Not only does he know his product like no other, he makes a special point of communicating throughout each transaction and his follow up skills are unparalleled. Perhaps most importantly, he delivers on his promises!ᅠ Give him a try for your mortgage needs.ᅠ You will not be disappointed!"
Jeremy H.
Read More
"An outstanding job handling refinances.  One of those knowledgeable, straight-shooters - which is really appreciated when you're shopping for a home loan. He can answer a million of questions with ease.  Looking back at the responsiveness, he was outstanding and you can do everything he suggested."
Jaina D.
Read More
"You can rely on them, very professional and quick in responding to your queries. He is very friendly and makes sure we understand the process and keeps us posted on the status of our loan. His efforts are greatly appreciated."
Eshawn W.
Read More
“By far the best lender we’ve worked with. Got us the best loan amount than any other lender. He worked with us hand in hand, he is professional, and he made the process enjoyable.”
Jaina D.
Read More
"You can rely on them, very professional and quick in responding to your queries. He is very friendly and makes sure we understand the process and keeps us posted on the status of our loan. His efforts are greatly appreciated."
Cass Z.
Read More
“I called looking for information about the process of applying for a mortgage/refinance and am just blown away with how helpful the information I received was!”
Stephanie F.
Read More
“I have hope because of you for making my home ownership dream come true. I feel such a connection with you and am excited to work with you. Have an amazing day!”
Rachel S.
Read More
"Highly ethical, attentive and helpful! A fantastic combination of personable and hard working. He makes everyone feel important and understood."
Cliff S.
Read More
“Hands down the best mortgage professional I’ve worked with in 20 years. Knowledgeable, honest, reliable and above all an outstanding communicator.”
Jose A.
Read More
"He worked on getting the lowest rate and kept me informed on each step of the process from the beginning to closing. Thank You!"
Nicholas H.
Read More
“Thank you for your prompt help and AMAZING assistance. Hands down, best lender I have ever worked with. Top notch!”
Tiffany
Read More
“I would be 100% interested in working more with you! You have proven to be an amazing lender”
Sandy C.
Read More
“Absolutely the most knowledgeable, friendly and honest expert I’ve ever worked with!”
Steve R.
Read More
"A pleasure to work with. He was very prompt and courteous with his responses and genuinely cares about the clients he works with."
Kevin H.
Read More
"Professional, responsive and honest assistance with the whole refinancing process from beginning to end."
Previous
Next

We help you reach home ownership.

No catch. No hidden fees.

Have you served in the military or your community as a healthcare provider, teacher, or first responder? Are you a member of your local union or work for your city government?

Are you looking to buy a home but don’t know where to start when it comes to finding your best home financing options?

At Hero Home Programs™, our teams are dedicated to helping community heroes like you through the home purchasing process by finding the best grants, rebates, and loans in your area in order to maximize your savings and help you achieve homeownership.

Contact our team today to learn how we can and mortgages can change your life.

Resource Guides

Complete A to Z guides on your home purchase journey.

Learn about the process for getting a home loan

What steps you can take to improve your credit score

Tips and tricks for moving into your new home

Your step-by-step guide for buying a new home

Scroll to Top