The Value of Location in Real Estate
You’ve probably heard the cliché: The three most important things in real estate are location, location, location. But the word “location” covers a multitude of factors. Here are the aspects of location that matter most in the homebuying process.
The Three A’s of a Good Neighborhood
What makes a “good neighborhood” is subjective. A homebuyer looking for a cosmopolitan lifestyle, for example, may not desire a suburban location, and vice versa. But there are objective qualifiers.
- Accessibility. Consider your commute. If you’ve got one, commuting to and from work could play a role in choosing a home location. Good accessibility often means a home with access to major roads and public transportation to a large metropolitan area. It could also mean living near a small town or a desirable coastal area. How effortlessly can you get to the places you want to go? That’s accessibility.
- Amenities. For many homebuyers, quality public schools are essential amenities. Top public school districts can boost home values. Proximity to grocery stores, shopping, and restaurants can be just as important, if not more. Nearby parks, playgrounds, and other green spaces can increase a home’s value by up to 20%. That percentage is higher for homes located near “greenbelt” areas for hiking and biking.
- Appearance. The concept of “curb appeal” doesn’t just apply to the home you’re buying; the condition of neighboring homes often affects your home value. If a neighborhood’s homes are well-kept, that could raise home values by as much as 10%. If a neighborhood has homes in disrepair, the values of the surrounding homes can suffer.
The Economics of Location
You’ve found a home with the accessibility you want and the amenities you need in a neighborhood that appears wonderful. It’s time to consider how location impacts two key financial factors: home value and property taxes.
- Home values. Over time, most home values increase and some decrease. Location is often a determining factor. For example, between Q2 2023 and Q2 2024, the prices of homes in Syracuse, New York, increased by 14.2%, while homes in Austin, Texas, had a 3.2% decrease. Predicting home appreciation with certainty is impossible. However, you can look at factors that impact property value appreciation. These include crime rates, infrastructure, employment opportunities, noise levels, and environmental factors.
- Property taxes. How much will you pay? That answer varies significantly from location to location, with each city, county, and school district levying taxes on homes within their boundaries. A real estate agent can give you a realistic estimate of the property taxes you’ll pay. You can also get an estimate from a property tax calculator.
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The Homeowners’ Association Question
Homeowners’ Associations (HOAs) create and enforce rules for properties in designated locations. HOAs are increasingly common, increasingly costly, and can be difficult to avoid. In 2024, about 40% of homes for sale in the U.S. had HOA fees, with a median cost of $125 a month. Is it worth the expense? You can weigh the pros and cons:
The Pros of HOAs:
- The HOA may provide shared amenities such as a pool, tennis courts, or a door person.
- HOA dues could cover maintenance and upkeep in common areas.
- HOA rules often keep a neighborhood looking nice.
The Cons of HOAs:
- It could be an annual expense of around $1,500 that you wouldn’t have in a non-HOA location.
- Fines for breaking HOA rules can be costly, and the HOA has the legal right to enforce fines.
- HOA rules, such as home color or landscaping requirements, might feel restrictive.
The Importance of Lot Size
No matter the size of the land a home sits on, it’s good to keep concepts that might seem at odds in mind. A house is a depreciating asset; wear and tear lower the building’s value. The land the house sits on, however, is (almost always) an appreciating asset that gains value over time. Lot size, therefore, has a significant impact on resale value. Say, for example, you’re considering two homes in comparable locations. One home, on a large lot, needs repairs. The other home, on a smaller lot, is in perfect condition. The wise financial choice usually favors lot size over home conditions.
Today’s Location Trends
Data from the National Association of Realtors’ most recent Home Buyers and Sellers report report offers data on first-time homebuyers and others.
- The Suburbs Dominate. Among all homebuyers (of which first-timers are 24%), 45% chose suburban/subdivision locations in 2024. 23% bought homes in small towns, 16% in cosmopolitan areas, and 14% in rural areas.
- Commuting Concern is Down. In 2024, proximity to the workplace was a deciding factor for 34% of homebuyers. Ten years prior, that number was 52%.
- Neighborhood, Family, Affordability.Homebuyers rank these factors in that order: 59% cite neighborhood quality as one of the most important factors in buying their home, 45% chose locations close to friends and family, while 36% said affordability was the most important factor.
- Compromise Happens. About 17% of first-time homebuyers chose less-than-ideal locations to achieve homeownership.
PwC’s 2025 Emerging Trends in Real Estate report tells us which locations real estate investors are targeting.
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- The Sun Belt Dominates. While the Sun Belt region as a whole is popular with real estate investors, there are a few stand-out locations. These include cities in Florida, notably Miami, and towns in Texas, including Austin and Dallas/Fort Worth.
- Demographics and Migration. Real estate investors are going where the people are, buying properties in America’s fastest-growing cities. Topping that list are Leander, Texas; Palm Desert, California; Naples, Florida; Casa Grande, Arizona; Bonita Springs, Florida; Conroe, Texas; San Marcos, Texas; and Zephyrhills, Florida.
- The Midwest and South Offer the Biggest Yields. Real estate investors are increasingly targeting the country’s more affordable markets in the Midwest and South. The current hotspots are Memphis; Oklahoma City; St. Louis; Kansas City, Missouri; and Birmingham, Alabama.
To learn more about the importance of location, and how to finance your home in an ideal location, call us at 1-888-505-8960 or connect with us online today.