A number of factors affect house prices, including the age, condition, location and size of your home. Also, broader factors like the economy and current interest rates can play a role.
If you’re considering putting your house on the market, it’s important to know what determines property value so you can ensure you get the most out of what’s likely your largest asset.
Read on to learn more about the main factors that make property value increase and how you can figure out how much your home is worth.
Key Points
• Location, size, and condition significantly influence property value, forming the core of assessment.
• Real estate comparables and economic factors offer essential market context for valuation.
• Age of a property and maintenance impact the value through and influence a prospective buyer’s renovation expectations.
• Professional appraisers can provide accurate valuations, essential for understanding true property worth. Websites and apps can be useful, too.
• House price index calculators help project future values, aiding in investment decisions.
Factors that Affect Home and Real Estate Value
Factor #1: Location
There’s a reason everyone will tell you that real estate is about location, location, location — it’s true. When it comes to factors that affect property value, location is one of the biggest determinants.
Keep in mind that while your home’s location works for you, others will have their own criteria. For example, how good are the schools in the area? Is shopping and entertainment accessible? What are property taxes like in the neighborhood? Is it a long commute to downtown or wherever many jobs may be?
Factor #2: Size
Size often isn’t the be-all-and-end-all, but it’s nearly so when it comes to what determines property value. Square footage plays a big role when it comes to house prices. For example, if the median price per square foot in the U.S. is $231 (the March 2025 figure from the Federal Reserve Bank of St. Louis), you’ll be getting more for a house that’s 4,000 square feet than one that’s 2,000 square feet.
It also matters how much of the space in your house is actually usable. Spaces like unfinished garages and basements as well as attics typically won’t boost your home’s value even if they do tack a lot onto the total square footage. What will matter in terms of square footage are areas like bedrooms and bathrooms.
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Factor #3: Real Estate Comparables
You’re supposed to love thy neighbor, but you might give them the side-eye if their home is not well-maintained and becomes a drag on the desirability of your street as well as on home prices. When it comes to home values, your neighbors are critical. If their homes are being highly sought by buyers, you’ll likely benefit from the popularity of the area.
The word to know here is comps, or comparable homes in your area that have sold in the last 12 months. These are part of what realtors and home appraisers rely on when estimating how much your home is worth.
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Factor #4: Age
While it may be frowned upon to ask someone their age, it’s an essential detail when it comes to home buying. If you’re dealing with a home that has a few decades in the rear-view mirror, you’ll have to do some math. How soon might the roof and other major systems need to be replaced or upgraded? That can affect the price someone is willing to pay, as they might want to pay less if they’re anticipating needing to shell out money for those repairs.
A house that is less than 10 years old — and even better if it’s less than five — can command more money because the buyer has a certain amount of confidence that repair bills shouldn’t be on the immediate horizon. They expect they’ll have time to save money for when that day eventually arrives.
Factor #5: Condition
If your home isn’t in tiptop shape, don’t expect to bring in the big bucks. In fact, if you have the luxury of time, it might behoove you to make any necessary repairs and do any upgrades and updates before you put your house on the market so you can maximize the chances it will get set at a higher price. Consider the cost of home improvements an investment.
At the same time, you don’t want to get too carried away here, as it is possible that you won’t be able to recoup all that you spent. Do just enough so that you might be able to squeak out some profit when you sell. While it varies by region of the country and other factors,projects that can pay off include a garage and/or front door replacement, adding manufactured stone veneer and a minor kitchen remodel. Some of the less profitable projects included an upscale bathroom addition and an upscale master suite addition.
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Factor #6: The Economy
You could have crossed all your t’s and dotted all your i’s — your home is attractive inside and out and you’re in a great location. Trouble is, if the economy is less than stellar, you could be stuck until it swings back into positive territory. If people are uncertain and feeling insecure due to the economy, they may decide to delay major life changes, such as buying a home. Or, if they do move forward, they may be looking for bargains, which is a downer for you.
Your local economy and market also figure into the equation. It’s about supply and demand. If there is a shortage of available housing in your area and tons of potential buyers on the hunt, you could capitalize big time on a hot market — think bidding wars and selling your home faster than you could have imagined.
Factor #7: Interest Rates
When interest rates are low, it’s an incentive to buy. This is because doing so can be dramatically less expensive. On the flipside, when interest rates tick upward, fewer people may be able to home shop because it’s more costly. If demand slows, the price you can command may dip as well.
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How to Check What Your Home Is Worth
Get an appraiser: One way to check how much your home is worth is to get an appraiser, someone who is licensed or certified by the state, to conduct a home appraisal. The appraiser will review your home from top to bottom and compare it to other homes in the area and beyond to determine its fair market value.
Make a list of comparables: You could also go dig up property comparables on your own. For example, you can call real estate agents with homes in escrow to learn the sales prices. There are also several websites that could give you valuable insight on your home’s value, including Zillow, Trulia, Redfin, Realtor.com and Eppraisal, among others. You might also use other property tracking apps as well; see if your financial institution offers one.
Use an HPI calculator: Another option is to use a house price index (HPI) calculator , which uses data from mortgage transactions over time to estimate a home’s value. The calculator makes projections based on the purchase price of the home and the changing value of other homes nearby. This tool is ideal for seeing how much a house has appreciated over time and any estimated future changes in mortgage rates.
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The Takeaway
Knowing what factors impact your home’s value is like knowing how much money you have in the bank. Determine where you may have weaknesses so you can make the necessary adjustments to get the maximum value for your home when you go to sell.
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FAQ
What factors affect the value of a property?
Comparable home values, the age, size, and condition of a property, neighborhood appeal, and the health of the overall housing market can affect home prices.
What decreases property value the most?
Among the key factors lowering property value can be delayed maintenance, sloppily executed home improvements, out-of-date bathrooms, and kitchens, roof damage, and mold.
Can I sue my neighbor for lowering my property value?
Technically speaking, you can, but it may be an uphill battle to prove that your messy or otherwise less-than-desirable neighbor’s property had a negative impact on your financial standing. If you file a lawsuit, you may need to hire a real estate professional to prove that your value dropped due to the neighbor as well as an attorney.
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