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What Affects Property Values?

Aerial view of a neighborhood

Property values are influenced by a wide variety of factors, including location, a home’s hedonic attributes, overall economy-wide conditions, community amenities, carrying costs, government policies, and possible nuisances. Understanding these factors is crucial for anyone looking to invest in or sell residential real estate, as they can have a significant impact on the price of a home. ­­


­Location is one of the most important factors that affects house values. Properties located in desirable areas, such as those close to A-rated schools, major places of work, high-end shopping, trendy restaurants, popular cultural venues, and outdoor attractions (e.g. beach, natural preserves, higher grounds with spectacular views), tend to have higher values than those in less desirable areas. This is because people are willing to pay more for the convenience, prestige, and access to amenities that come with a prime location.

Hedonic Attributes


The size of a house is a key hedonic attribute that affects its price. Larger houses typically come with a higher price tag than smaller ones, as they offer more living space, are often more luxurious, and provided added flexibility (e.g. working from home or being able to take care of aging parents). Besides just the size, the number of bedrooms, bathrooms, and other living spaces can also significantly affect a home’s price. Homes with large, open living rooms, tall ceilings, and plenty of natural light are often more desirable and therefore more expensive. The layout and functionality also often play a role in a home’s desirability.


Homes with modern upgrades, done with taste and consistency, can be sold at a significant premium. Who doesn’t like a beautifully upgraded modern kitchen with sumptuous waterfall quartz countertops, high-end appliances, a walk-in pantry, and a luxury farmhouse sink? Or luxurious bathrooms with frameless shower cabins and carved stone designer freestanding soaker bathtubs? Homes with natural or engineered wood or stone flooring, with a consistent unbroken flow throughout the house can also raise its appeal.


The age of the property can have an impact on its price. Older houses tend to be less valuable than newer ones, as they may require more maintenance and repairs. In particular, in Florida, the age of the roof has become a serious consideration for homebuyers. However, some older properties may actually be more valuable, as they may be seen to be rare thanks to a unique architectural style and may have cultural or historical significance.

Backyard, landscaping, swimming pool, gazebo, etc.

Besides the house itself, what’s immediately around it is critically important too. Beautiful landscaping can raise a home’s curb appeal, so it often makes sense to make a small investment in landscaping. A large, functional backyard is always a giant plus. A private swimming pool can also boost a home’s price by tens of thousands of dollars.

Community Amenities

The amenities of a community can also play an important role in determining not only the home prices but also how quickly they sell. Communities with a well-functioning club house, a community pool, gym, tennis and basketball courts, children’s playgrounds, and so on, tend to appeal to a broader range of buyers, thereby helping to bid up the community’s property prices. Also, the aesthetic appearance of the neighboring houses is critical. For this reason, communities with homeowner associations often require regular maintenance of the homes’ facades and front lawns and may regulate changes to the homes outside appearance, e.g. exterior paint, additional structures, parking of boats and RV’s, etc. On the flip side, if the HOA board has the reputation of being too intrusive or stiff with rules(picture a board member golf-carting around the neighborhood and checking the height of your lawn grass with a measuring tape), it can hurt the community’s property values.

Environmental Hazards and Nuisance

Homes located in the vicinity of trash distribution centers, flood zones, high-pollution areas, busy roads and railroads, and noisy bars are likely to sell at a lower price than similar homes in other areas.

Other Hedonic Characteristics

In addition, if you’re listing your house for sale, have your realtor factor in such seemingly subtle attributes of your home as its front exposure (i.e. south, east, north, west), height of ceilings and doors, the convenience of the layout, cul-de-sac (if applies), building materials (e.g. concrete block or wood frame), lead or polybutylene pipes or lack thereof, age of the roof, backyard view, etc.

Economic Conditions

Income – GDP and employment

The state of the economy can have a significant impact on home prices. When the economy is strong, with low unemployment and high levels of economic growth, home prices tend to rise as people have more disposable income and can afford to buy more expensive homes. On the other hand, when the economy is weak, with high levels of unemployment and slow growth, home prices tend to decline as people have less disposable income and are more hesitant to make large investments.


Changes in wealth can be equally important as income, especially in the higher-priced housing market segments. Gains and losses on the stock market is an important demand-side factor in the market for residential real estate.

Monetary Policy

Policies of the Federal Reserve have an outsized impact on home prices. When the Fed sets its target interest rate (the so-called federal funds rate), other interest rates, including those on mortgage loans, tend to mimic the fluctuations. When interest rates are low, it becomes cheaper to borrow money, and more people are able to afford to buy homes. As a result, home prices tend to rise during periods of low interest rates. Conversely, when interest rates are high, mortgage loans become more burdensome, and the resulting drop in the demand for homes exerts a downward pressure on property prices.

Fiscal Policy and Regulations

Tax policies that encourage home ownership, such as tax deductions for mortgage interest and homestead exemptions, can increase demand for homes and push up prices. Conversely, high property taxes or restrictions on new construction, can reduce the demand for homes and push down prices.

To recap, property values are influenced by a wide range of factors, and you should talk to a qualified real estate professional to help you get a better idea of your home’s value. Whether you’re selling your home or looking to buy one for yourself or as an investment property, making informed decisions on property pricing can make a difference of tens of thousands of dollars.

© This article is copyrighted by Kana Nur-tegin. All rights reserved.

How Much Is Your Home Worth?

Zillow's Zestimate is based on a nationwide averaging algorithm, so it's often unreliable. Zillow's employees live and work in Seattle, WA. Most have never seen the Palm Beaches and don't know anything about the local communities, amenities, what's locally popular, let alone a home's interior upgrades, etc.

In contrast, we do all our CMAs one at a time. For YOUR specific home. Using LOCAL comps. With KNOWLEDGE of layout models and community features. Keeping in mind most RECENT local market trends.

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