For many homebuyers, investors and sellers, home price appreciation rates are an important element of the home-buying and selling process. Since buying and selling a home is about the biggest investment you'll ever make, understanding whether your home's value has gone up - or down - is important.
Appreciation refers to an increase in value of a property. It is a measure of the demand for the property. The easiest way to calculate appreciation is to collect a sample of home sales in an area for a certain period and compare the average or median sales price of that sample to a similar sample from the previous year. When a property appreciates, the value of the home increases and the homeowner can realize a greater profit when they sell.
Conversely, when your property depreciates, the value of the home decreases and the homeowner can realize less profit when they sell. Home values fluctuate regularly for many different reasons, but over the long term homes have always increased in value. Short-term increases or decreases in value are triggered by employment rates, interest rates, business growth, housing supply, demand, affordability, crime rate, weather, quality-of-life issues, the quality of schools and other factors. What a home is worth depends on these elements, which impact what a buyer is willing to pay for your property.
Many other factors affect real estate appreciation rates. Upgrading a home - like remodeling a kitchen, a bathroom or a living room - increases the value of a home. Moreover, many homebuyers select areas to live based on close proximity to work, schools and transportation routes. A good school district is also a barometer of home appreciation.
Sellers, buyers and curious homeowners can research the value of any home nationwide using RealtyTrac's Home Value Center, which provides an estimated value range and allows users to order a detailed home value report that includes comparable sales, neighborhood information, performance rankings for local schools and much more. Visitors to the RealtyTrac Home Value Center can also request further assistance from a local real estate agent.
Subscribers to RealtyTrac can view estimated market values and comparable sales for hundreds of thousands of foreclosure properties listed on the website - at no additional cost. This information equips prospective buyers and investors with the critical information they need to make smart purchases.
For those interested in more broad-based research of home values, a widely available housing price index is compiled by the Office of Federal Housing Enterprise (OFHEO), a federal agency that monitors Freddie Mac and Fannie Mae. OFHEO tracks home price appreciation on a quarterly basis. The OFHEO House Price Index (HPI) covers jurisdictions across the United States with consistent methodology and data. The index is calculated based solely on information from the government-sponsored mortgage giants, Fannie Mae and Freddie Mac. Combined, Fannie Mae and Freddie Mac finance or guarantee about two-thirds of all U.S. home mortgages.
Another index of home prices favored by some Wall Street economists is Standard & Poor's/Case-Schiller quarterly U.S. National Home Price Index, which tracks price trends among existing single-family homes across the nation compared with a year earlier.
No matter what measure is used, however, homebuyers should understand and know the home appreciation rates in their local area. Whether you're looking to determine the value of your home for resale, seeking a second home or searching for investment properties, RealtyTrac can help you determine if your home has appreciated or depreciated.