Whenever you hear the phrase home price appreciation, what does it mean to you? Within the context clues, chances will be you’ll know that it has something to do with rising home prices. As a seller, you would know that rising home prices are good news for your potential sale. However, let’s have a look past the dollar signs and dive deeper into the concept. To better understand home price appreciation, you will need to know how it actually works and why it matters to you.

Investopedia defines appreciation like this:

“Appreciation, in general terms, is an increase in the value of an asset over time. The increase can occur for a number of reasons, including increased demand or weakening supply, or as a result of changes in inflation or interest rates. This is the opposite of depreciation, which is a decrease in value over time.”

If we will consider this definition and how it applies to real estate, a few words stick out: supply and demand. With today’s real estate market, we’re experiencing a high buyer demand and very few sellers listing their homes for sale (see maps below):

Regardless of the industry, anytime there’s more demand than supply, prices naturally rise. This happens because buyers are willing to pay more to secure the scarce product or service that they’re actually looking for. Which is exactly what’s happening in today’s real estate market. A lot of buyers are competing with one another to purchase a home, which then leads to bidding wars that drive prices up. As for sellers, the rising prices eventually mean that opportunity is knocking.

As per Quicken Loans, the national average home price appreciation rate is between 3-5% in a typical year. Nowadays, home prices are appreciating well beyond the norm due to high demand. Here are the latest expert projections on the rate of home price appreciation for this year (see chart below):

As compared to the normal pace of 3-5% appreciation per year, the current average forecast of nearly 11.5% is very significant.

Sellers, this means that with the current rise in prices, your house could be worth more than you realize. Such price appreciation helps a lot in giving your equity a boost. Equity is the difference between what you owe on the home and its market value based on factors like price appreciation. It works like this (see chart below):

There’s a lot of ways to benefit from your built-up equity to power, a move into your dream home, or you can put it toward life-changing goals like funding education or opening a business.

Just don’t wait. Whilst price appreciation is strong now, those same experts say it’ll start to appreciate at a more normalized pace next year. Listing your house sooner rather than later, will put you in a better position to capitalize on the higher-than-average home price appreciation we’re seeing today.

Bottom Line

Thinking of selling your house? there really is no time like the present. Contact My Tampa Agent to get an expert market analysis of your home and its potential.

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