Tom Kalinski, RE/MAX of Boulder

Tom Kalinski, RE/MAX of Boulder

If you’re a homeowner, a quickly rising real estate market is good news. It’s comforting to see your home value rise. Yet, many homeowners don’t live in the last home they will ever own, making rising prices also a source of anxiety.

The question is, what do rising real estate prices mean for the next house you buy? Will the home you own today appreciate at a greater or lesser rate than the home you’re going to buy?

According to analysis by Realtor.com drawn from millions of listings from 2011-2016, some home features appreciate more than others. Knowing this could help you gauge which home updates pay off the most – and which may not pay off at all. It can also help you choose a home that will appreciate at the top of the curve.

As a point of comparison, Realtor.com says that in a strong economy, home values generally increase three to four percent a year on average nationally. In the most recent years, from 2011 to 2016, national home prices increased at about twice that rate, rising 6.3 percent a year on average.

Here are the stats and patterns noted on home appreciation in an article published by Realtor.com.

Small outpaces big
For the past five years through 2016, bigger has not been better. In fact, the smallest homes appreciated the fastest, with those less than 1,200 square feet growing 7.5 percent a year for the past five years. By contrast, homes over 2,400 square feet increased 3.8 percent a year, according to Realtor.com.

If you consider the demographic trends of the day, this makes sense. Currently, the two largest demographic groups – millennials and baby boomers – are seeking smaller homes. Millennials approach home buying from a starter home perspective, while baby boomers want to downsize.

Yet housing developers focus on the high-end, larger-home market resulting in fewer smaller homes being built, leaving unmet demand for smaller homes. And those who currently own smaller homes aren’t trading up fast enough to meet the demand, the article points out.

Denver is being impacted by this trend. As Realtor.com notes: “This effect is more pronounced in expensive urban markets like San Francisco and Denver, where homes of under 1,200 square feet see 17% and 12% price growth a year, respectively.”

Fewer bedrooms and two-car garages drive greater appreciation
Here again, smaller is better. Five-bedroom homes appreciate at 4.3 percent a year, while two-bedroom homes are increasing
6.6 percent.

And in garages, the Goldilocks ‘just right’ number rules, and that number is: two. Two-car garages grow at 6.4 percent a year, a one-car garage 6 percent a year, and three-car garages lag far behind
at 3.8 percent.

Open floor plans and patios
Homes with open floor plans are clearly at the top of the desirability chain, appreciating 7.4 percent a year, along with homes with patios, which increased 6.8 percent a year.
Location

You won’t be surprised that location really does matter – especially locations close to public transportation and ‘good’ schools. Homes near train stations and bus stops appreciated 8.4% each year, and those near the most desirable schools appreciated 7.2% a year.

Last but not least – views
Of course a view of any kind is desirable, but some scenes drive prices higher than others. Park views led the pack, appreciating 7.9 percent a year. Mountain views followed at 5.1 percent, lake views at 4.9, views of a golf course grew at 4.3 percent and ocean views increased 3.6.

What doesn’t add value
Here’s the surprise. That luxury kitchen décor we love to love – stainless steel appliances and granite countertops – don’t perform as well on the price appreciation scale, growing only three percent and 2.5 percent respectively. Though, they shouldn’t be discounted too heavily. According to Realtor.com, these kitchen features do drive ‘desirability.’ They are a ‘must-have’ in many markets including competitive buyer’s markets or the luxury home market.

Read the full article, including which home styles appreciate the most, by data journalist Yuqing Pan on Realtor.com at this link: realtor.com/news/trends/which-kinds-of-home-appreciate-fastest

By Tom Kalinski, RE/MAX of Boulder. Tom Kalinski is the owner and founder of RE/MAX of Boulder. Call 303.441.5620, e-mail tomkalinski33@gmail.com or visit boulderco.com.