What brings down property value?
Unfortunately, there are many things that can bring down property value. It helps to categorize these items into as follows:
Property-centric home value destroyers
Property-centric items that bring down your home's value are much more in your control than market-centric items, so it's important to make sure you are alert and maintain your property proactively before small issues become big, expensive problems.
- Roof leaks, water intrusion, foundation issues -- roof leaks that go unaddressed can cause major property damage (water damage, mold growth) that can quickly destroy the value of your home. Foundation issues that result in water intrusion or structural instability can be very costly and hazardous. Other items that result in water intrusion and biological growth (mold) include separated siding, unsealed entryways and windows.
- Pest infestation -- termite damage can require substantial and expensive remediation. Rodent infestation can cause structural damage due to chewing through hard to access places. Rodents can also cause electrical wiring damage.
- Tenants with poor hygiene -- as you might imagine, poor hygiene can cause pest infestation, foul odors and other issues that can bring down the value of your property.
- Tenants who damage or neglect the property -- if you lease your house to people who break things or don't report maintenance issues, you can expect costly repairs that you may be left on the hook for.
- Delinquent tenants -- it may be costly and time consuming to evict delinquent tenants. These are commonly the same people who damage or neglect the property. That's why it is so important to thoroughly screen prospective tenants.
The list goes on, and the message should be clear: an ounce of prevention is worth a pound of cure.
Market-centric home value destroyers
Market-centric factors can be much harder to control for and avoid.
- Economic downturn -- whether local to your community or city, or nationwide (i.e. 2008 financial crisis), economies can experience short term shocks and longer-term structural issues which will be discussed below. When this happens, the price people are able and willing to pay for your house may be less then in the recent past.
- Rising interest rates -- when interest rates increase, the interest payments for new mortgages goes up. Buyers can't afford the same purchase price range as when interest rates and their associated monthly payments are lower. As a general rule of thumb, rising interest rates will cause home prices to decline.
- Population decline -- related to the concept of economic downturn, when a local market experiences a declining population, it means there will likely be an imbalance of the supply of houses relative to the demand for houses. Housing demand and home prices may further decline, as many buyers become hesitant to purchase houses in markets where the proverbial bottom is unknown.
- High property taxes -- high taxes can lead businesses and residents to relocate elsewhere, resulting in lower demand for housing inventory.
- High crime rate ---
- Poor governance -- corruption and unreliable city services can make would-be homebuyers look elsewhere. Lower demand for your house means a lower price.
- Low quality public schools -- many parents and guardians of children approaching or in the K-12 age range are sensitive to the quality of public schools. If your home is in a school district that is experiencing a decline in rankings, there will be lower demand for your home -- lower demand means lower property value.
As with property-centric home value destroyers, the list of market-centric home value destroyers continues on and is closely inter-connected.
Before buying a house, understand the property and market-based factors that can bring down property value and do your research!