A home’s value generally appreciates 3 percent to 4 percent every year, which is attributed mostly to population growth and inflation. However in 2016, homeowners saw appreciation jump to an average of 6.3 percent.
Realtor.com®’s research team sought to find out what would boost a home’s value even more and what home features buyers may be willing to pay more for. Researchers analyzed millions of listings on realtor.com® from 2011 to 2016 to calculate the annual price growth rate of homes with certain features.
Here are some of the clear winners in housing appreciation:
Small homes: Homes smaller than 1,200 square feet appreciated by an average rate of 7.5 percent a year for the past five years. On the other hand, larger homes of 2,400 square feet or more rose by 3.8 percent a year. The smaller-home demand is being driven by millennials wanting to enter the market with a more affordable starter home and baby boomers who are looking to downsize, realtor.com® notes. Further, smaller homes are in shorter supply, which is prompting prices to increase more due to the high demand, says Jonathan Miller, president of Miller Samuel, a real estate appraisal firm.
Two-bedroom homes: Homes with two bedrooms appreciate at a rate of 6.6 percent a year, compared to homes with five bedrooms that appreciate at 4.3 percent a year, realtor.com®’s research team found.
Open floor plans: Homes with open floor plans appreciate 7.4 percent a year. It’s the hottest appreciating home feature that realtor.com® studied (see side for full list). As for features like stainless steel and granite, Miller says those amenities don’t really add any value to a home. “Those are what I call ‘have-to-have’ features,” Miller says. “A home needs to have them in a competitive market. But they don’t add long-term value. … Ten years from now, when you update your kitchen, they’ll be replaced.”
Modern and contemporary homes: Modern and contemporary architectural styles have the highest potential for appreciation, increasing at about 7.7 percent annually. This style of home is known for simple, geometric shapes, and large windows. Newly constructed modern homes also tend to be energy efficient. Bungalows and Traditional are the next highest appreciating styles at 6.5 percent and 5.6 percent, respectively. Meanwhile, niche styles like Craftsman bungalows and Victorians are among the lowest appreciating architectural styles, at 3.7 percent and 2.2 percent, respectively. Researchers speculate that may be due to some of the maintenance responsibilities in staying true to the home’s historical architecture that is often connected to these styles of homes.
Green space views: Homes with a park view appreciate at 7.9 percent a year, realtor.com®’s research team found. “[They] hold value over a longer period of time, and they recover quickly from a downturn,” says Michael Minson, a real estate pro in San Francisco at Keller Williams. “Buyers appreciate the tranquility and outdoor activities. They like being close to nature.” Indeed, homes with mountain views appreciated on average by 5.1 percent, and homes with a lake view at 4.9 percent. Ocean views appreciated the least of the “home views” studied, at just 3.6 percent a year. Recent storms may have spooked buyers from oceanfront properties as well as the fact that the highest-cost homes tend to be along the ocean, realtor.com®’s research team notes.
Striving to become a prudent person is a laudable goal—one usually only achieved after impetuous youthful misadventures have taught the wisdom of prudence. Caution—particularly in financial matters—may seem to be synonymous with prudence—but they aren’t always the same thing. Especially when there are magicians at work.
An example of that can be found in the way most people think about Hendersonville rental properties. There’s no sleight-of-hand from the landlord’s point of view: few would argue with the proposition that rental properties are a prudent form of investment.
The now-you-see-it, now-you-don’t sorcery happens when the audience (in this case, renters) view the same proposition: buying a home instead of renting. From that perspective, the exact same prudent investment can seem to be transformed into a fearfully huge risk. Taking the plunge—buying a home—has become a dangerously formidable commitment. It would seem to be a more prudent course to put off that kind of years-long gamble. After all, who knows for sure what the future will bring? Signing on the dotted line for a 15- or 30-year Hendersonville home loan seems like a humongous step into the unknown.
This apparently prudent risk assessment is actually a conclusion that fails to see what’s happening behind the distracting illusion. At its root is a basic truth behind the rent or buy decision:
Unless you’re living with your parents, you’ll be paying off a mortgage—either way.
The choice comes down to paying for a landlord’s loan or paying for your own. If you take the mortgage yourself, you have to make the payments. If you rent from the landlord, you also have to make the payments—with the landlord acting as middleman.
As soon as you’ve peeked behind the curtain to acknowledge that fact, a couple of other notable backstage realities are likely to come into focus:
First, if you buy a home via a fixed-rate mortgage, you can plan on what your payments will cost—now and 15 or 30 years from now. It’s written in stone. On the other hand, if you rent, you won’t know what your rent payments will be a few years from now. The first choice is the one that creates predictability and stability: i.e., prudence.
Second, if you buy, eventually the loan payments will equal zero. If you rent—well, having seen behind the curtain, you know what happens eventually: i.e., more payments.
At least in the world of Hendersonville rental properties, there is a distinct difference between prudence and caution. In the rent-vs-buy calculus, it’s pretty clear which is which.
Once you have peeked behind the curtain, you may also conclude that it’s an even more prudent idea to become a landlord yourself. And right now, there are some excellent Hendersonville rental properties that could make that possible.
The timing for when to sell a Hendersonville home can be a decision that pretty much makes itself. Sometimes family demands call for a move to larger or smaller quarters; sometimes a change in career demands or a schooling decision dictates a residential switch. But there are other times when an eventual move is in the cards—but timing is flexible.
That’s a situation where the decision can hinge on expectations for where future Hendersonville home prices seem to be headed. Nobody likes to be taken by surprise—especially if the surprises were foreseeable. As we enter the start of the peak Hendersonville real estate selling season, it would be useful to know the direction Hendersonville home prices are likely to move. Right now, it looks as if mortgage interest rates are moving upward: will that make selling more difficult?
Looking for a truly well-educated guess, it’s hard to argue with the Nobel Prize Committee. Fortunately for us, those ladies and gentlemen named someone in the real estate economics field worthy of their international seal of approval (and a chunk of their 2013 Prize money). That’s Robert Shiller, the Yale Economics professor who accurately predicted both the dot-com and housing bubbles and who co-authors the authoritative Case-Shiller Index.
One logical concern for Hendersonville homeowners might be whether rising mortgage interest rates are likely to soften Hendersonville home prices this spring. The Wall Street Journal provided a reassuring answer: “U.S. Housing Market Roars into 2017, Case-Shiller Says.” Per their month-end roundup, “Home prices shrug off higher interest rates.” The shrugging they cited was indicated by the fastest growth in home prices since 2013—despite higher interest rates.
This may not be tantamount to Prof. Shiller’s personal guarantee that the recent interest rate rise won’t retard Hendersonville home sales—yet it does seem that history has seen a similar home price phenomenon before. In 1983, a 2.04% rise in mortgage interest rates resulted in a 6.6% rise in real estate values. In 1987, similar results. Between April 1999 and May 2000, a 1.6% interest rate rise accompanied a nearly 11% rise in values!
Hendersonville home prices will certainly not see anything like that 1999 kind of dizzying marketplace—and that’s just as well. The national consensus for 2017 is for moderate price gains in the 4%-6% range. But for those holding back from listing for fear that prospective buyers may shy away this spring, it doesn’t seem to be likely.
In fact, with a little imagination, you may almost be able to hear the approaching sound of the Journal’s housing market “roar.” If so, I hope you call me soon!
Time Magazine ended last week with a commentary that could foreshadow how this year’s Hendersonville housing market might differ from years past. Author Bill Saporito identified a mismatch in the housing market that could bode well for empty nesters. Whether or not the implications will be a perfect fit for our Hendersonville housing outlook, the “Big Picture” assessment does seem to gel with a lot of what we’re hearing and reading.
Time’s housing market “mismatch” begins with the national assessment that the U.S. is experiencing an annual shortage of as many as 700,000 new homes. Even though the latest economic outlook is refreshingly encouraging, new home builders are only now beginning to build the capacity to expand operations. As a result, “they haven’t banked as much land” or filed enough permits to keep pace. It’s also possible that the new administration’s crackdown on illegal immigrants may materially tighten labor availability.
What that probably means for our local Hendersonville housing prospects is what you expect when demand outpaces supply. When those greater conditions combine with the more immediate local factors, the overall takeaway should be good news for empty nesters (and downsizers in general). In addition to the extra energy that arrives with real estate’s traditional spring selling season, this year, in addition to the shortage of supply, the specter of rising Hendersonville mortgage costs acts as an extra prod. Time quotes the chief economist of one global group on that score: “…buyers are beginning to realize you might as well get in now.”
The good news for baby boomers, empty nesters, and downsizers of all stripes is that the new housing starts are now disproportionately being designed with them in mind: high service, luxury condos leading the pack. What that means is even fewer new single-family homes are in the pipeline—further raising demand for their existing properties, if and when they decide to list.
If you have been considering any of the opportunities unfolding in today’s Hendersonville housing market, I’ll be delighted to discuss ways I can help you take advantage of them. Call me for a consultation—of course it will be obligation-free.
This Sunday marked the annual “spring forward” sleep-robbing occasion: the switch to this year’s Daylight Savings Time. “Springing forward” may sound like a spirited, energetic exercise, but for Hendersonville residents like me who do our best to keep regular hours, this week it will inevitably produce, at minimum, an extra yawn or two.
If it sounds as if I’m a bit grouchy about the whole thing, it’s only partially true. I hardly missed the hour between 2 a.m. and 3 a.m. on Sunday, save for how it made the night’s sleep an hour shorter. Intellectually, I know that the hour is actually in the bank: come fall, everyone in Hendersonville will get the hour back. Without interest, though.
Despite the Daylight Savings enthusiasts’ objections, the way the Earth and Sun naturally cooperate with each other seems perfectly satisfactory. The gradual lengthening of daylight proceeds slowly enough to give everyone in Hendersonville ample time to adapt without interference from outsiders. It’s never been clear why we are asked to abruptly reprogram our internal clocks the way DST promoters insist. Originally, they say the reason offered was to save fuel—but if that never seemed to make much sense, you’ll be gratified to know you aren’t crazy. A 2011 study in Indiana proved that 4% more electricity was required once Indianans started observing DST.
Given that fact, it might seem economical for North Carolina to stop observing Daylight Savings so we could save that 4%—but then we’d be out of luck trying to figure out how to sync up with everybody in the rest of the country (except for Hawaii and Arizona).
That issue hasn’t been enough to discourage some foreigners, though. The number of countries observing DST has been gradually falling in recent years. Between last year and this, for instance, Turkey and Mongolia dropped out. The world is now counting 75 observing countries, down from a high of 86 just eight years ago. If this keeps up, by 2030 or so, we may not have to discuss this at all!
This year Hendersonville’s calendar was complicated by the Daylight Savings kickoff being scheduled perilously close to Saint Patrick’s Day (Friday). This could result in more celebrants than usual nodding off during the festivities. Sleep-deprived party-goers might forget that they’ve already endlessly discussed whether green beer is a useful invention or whether St. Patrick really did drive all the snakes out of Ireland.
If they have fully recovered from Sunday, they might recall that there were never snakes there in the first place. “Snakes” was actually contemptuous put-down for the Druids, who were, in fact, driven from the Emerald Isle. As a group, they’d surely have grounds for a whale of a slander suit. There may be some Druids left somewhere (but probably not in Ireland).
Despite these distracting events, I can report that Hendersonville’s spring selling season is seeing the light of day and proceeding right on schedule. I hope you will give me a call if real estate matters will be part of your 2017!