What creates value in real estate?
The answers are simple and apply to practically every sales market: scarcity, supply and demand. If a property is limited and desirable, then the chances of market appreciation increase.
If you purchase property in a new development, and the new development is surrounded by vacant land, the vacant land continues the supply. Therefore, no matter how desirable, your home can only appreciate in the amount of replacement costs, because homes can continue to be built in a similar environment. In other words, buyers can simply build their own instead of buying your house.
Raising value-
If you purchase property that is scarce, -- that is, the area is completely developed and cannot be duplicated -- then the chances of market appreciation increase. For instance, there is a limited amount of land in Brevard County's beachside neighborhoods. Add that fact to many customers' desire to live beachside, and the result is greater value.
Similarly, the Lake Washington area is limited from developing to the west because there is an actual lake in the way.
Right now, in this current market, the supply of properties either beachside or in areas such as Lake Washington are plentiful, therefore, there is no market appreciation. For properties to appreciate, the demand must outweigh the supply.
Dwindling supply-
Now, as this market begins to change because of heavy influx of new employees and our special winter residents, we might begin to see our supply dwindle, thus creating a market that is appreciating.
In my professional opinion, this will not happen for several years down the road as we have an abundance of inventory in the home, townhome and condominium market. But as this market activity increases, buyers might find that their favorite property that they have been waiting to see the list price continue to drop has been purchased. There is a supply, but the very best values are being absorbed or purchased right now in this market.
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