Real Estate Home Prices and How They are Determined

Have you seen the posts on social media showing what type of house you can get in different cities? They’ll show a $500,000 home in California versus a $500,000 home in Nebraska, and the difference is incredible. How can you afford a big, beautiful house in one area but hardly anything in another?

It turns out that there are a lot of factors in play when it comes to real estate home prices, and there isn’t exactly a simple answer. Let’s look at some factors determining real estate home prices.

Location, Location, Location

Possibly the most significant factor in determining real estate value is its location. Location plays a larger role in the price than the size, condition, and amenities included in the home.

Of course, different parts of the country bring in higher values than others, but even in your own city, the home’s location plays a huge role in how much it is worth.

Is it in a good school district? Is it close to high-paying employment opportunities? Is it on the water or on a golf course? Is it close to shopping, dining, and entertainment? These all make a home more desirable, which drives up the value.

On the other hand, the home’s location could reduce the value. Say it’s near a power plant or next to the freeway. Not as many people will want to live there, so it makes the value drop.

Neighborhood Comps

Realtors and appraisers look at other homes in your neighborhood that are similar to yours to determine the value of your property.

These homes are comparable properties, most commonly referred to as “comps,” and are looked at in order to provide a good idea of what home buyers in today’s market are willing to pay for a home like yours.

All comps used to determine the value of a home should be located in the same neighborhood and similar in square footage, lot size, number of bedrooms and bathrooms, number of floors, number of garage spaces, and so forth. The goal is to find homes as similar as possible to determine how much the home in question could be worth if it were to sell today.

The Market

The real estate market plays a huge role in determining real estate values. The real estate market is all about supply and demand. In real estate, this translates into how many homes are for sale versus how many people are looking to buy one.

In the last two years, we’ve had really low inventory and a lot of house hunters, which led to increased home values. Now the market is beginning to shift. Although we cannot say that home values will come down everywhere, it is safe to say that we can expect the rate of appreciation to continue to slow. Many areas have started to see an increase in inventory. Because of the recent increase in interest rates and the uncertainty that comes from the fear of a recession we are seeing more and more buyers decide to press the pause button on their original plans to purchase a home. These factors will cause values to increase much slower than they have been, however, unless there is a drastic increase in inventory we do not expect to see a significant decrease in home values anytime in the near future.

Want To Know How Much Your Home Is Worth?

If you’re wondering how much your home is worth in today’s market, we can provide a home valuation and give you an idea fairly quickly. Click here to enter the necessary information and find out your home’s value today! Please feel free to reach out with further questions as well, we are happy to answer any that you might have!


Whether you are a first time homebuyer or you're ready for a bigger home and you've decided to sell,
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