Understanding appreciation

In today's real estate market, where inventory is sparse, homebuyers and sellers alike do well to understand the concept of home value appreciation.

Unlike the purchase of a car, that loses value (or depreciates) when you drive it off the lot, the value of your home may increase (or appreciate) over time. Appreciation is based on several factors – some within the homebuyer's control, other factors…not so much.

Where is as important as what

You've heard it before, and we'll say it again: Location, Location, Location. Where you purchase your home may be the most important (controllable) factor to appreciation.

If value appreciation is important to you, be sure to give thought to where – in the country, state, city, community, and neighborhood – you buy. According to Forbes, the southern half of the U.S. is the best place to invest in housing, whether you're looking for your family home or a rental property.

Other things to consider when purchasing as it relates to location: Is the home close to major highways? Are good schools nearby? Is it conveniently located to entertainment and shopping? Is there a nice view?

Investing in a desirable area may contribute to equity in your home down the line and could mean more money in your pocket if you decide to sell.

Acreage accumulates

Another factor to consider is how much you buy. We're talking land, though, not the physical structure of your home.  Why? It's pretty simple: supply vs. demand. Land is a limited commodity; we're not getting any more of it. As the world's population increases, so does its need for land.  

If your budget doesn't allow for both a large, fabulous home and a considerable piece of land, you may wish to consider opting for a more conservative home and keep the land.  

The upside of upkeep

Finally, take care of your home. If it breaks, fix it. If it's outdated, upgrade it. While it may not be as large a factor as the location and land itself, having a well-maintained home with attractive details and modern-day features may increase the equity of your home (and help it sell faster when you're ready!)

External affects

Giving thought to how your home will appreciate is the smart thing to do; however, the reality is that appreciation rates vary based on factors beyond the homebuyer's control.

The economy (global, national and local) affects the real estate market, which affects what your home is worth at any given time. Again, it's a matter of supply vs. demand.

In a nutshell: the more people can afford to buy houses, the greater the demand becomes for houses, making home values rise   

Timing is almost everything

If you're shopping for a home right now, you know it's a seller's market. In some areas, a home could be under contract within days, sometimes hours. This trend has had a positive impact on home values across the U.S.

Sellers have a good chance of getting the most 'bang' for their real estate 'buck' in the current environment.   

If you're in the market to sell, talk to a real estate agent to see what your home is currently worth. And if you're the conscientious consumer, pay attention to national forecasts to maximize your investment.