Property values are more than just numbers in a spreadsheet. Even if you're currently living in your forever home, its appraised value still matters. As your home's price goes up, you can leverage that increased equity through products such as HELOCs. In other words, you can realize your home's gains even if you do not intend to sell.
Since property values are so crucial, it's helpful to understand a bit about how they work. While your house itself is an essential factor, your neighborhood also matters. Determining which has a more significant impact on long-term values can be tricky, but there are three ways that your community (and neighbors) influence the value of your home.
1. First Impressions
Everyone knows that curb appeal is an essential element of a home's value. Even if it doesn't necessarily directly impact the appraised value, it can significantly influence buyers. There's more along the curb than just your home, however. Your neighbor's homes will also affect the first impression of potential buyers, and unsightly or distressed properties can harm your home's curb appeal.
Remember that neglected properties are more than just an eyesore. Cohesive, well-tended neighborhoods look like communities, and they create the impression of a welcoming and maintained place. Signs of long-term neglect can ruin this impression and potentially reduce the maximum price of your home.
2. Appraised Neighborhood Home Values
Part of the appraisal process for any home involves a review of recent sales in your neighborhood. Variations are common, but appraisers tend to notice trends. While it might be a point of pride to have the most expensive home on the block, falling too far outside the norm for your area can also limit your potential sales value.
If nearby homes' values seem to be declining, then that's an indication of a neighborhood on the downswing. Appraisers and potential homebuyers will notice this trend, and they may be reluctant to see your home for what it's truly worth. Unfortunately, this means that the quality of your neighbors' homes may influence how much return-on-investment you receive from home improvements.
3. Schools and Businesses
Buyers with families usually want good schools, and they may also be interested in child-friendly commercial areas. Poor schools, high crime rates in nearby business districts, or a lack of local amenities can all influence potential buyers and, as a result, the value of your home. Likewise, good schools and plentiful amenities can pull up the value of a home compared to similar houses in less desirable areas.
Whether you're buying, selling, or just worried about the long-term value of your existing house, it's always worth paying attention to the neighborhood property values. In many cases, this seemingly small factor can have a surprising influence on home value.