What Does “Depreciation” Mean In Real Estate?
If you have ever owned a large-ticket item such as a home or even an automobile, you have probably heard the term “depreciation.” Depreciation is defined as a decrease in the value of your property over time.
There are many things that are figured into the value of your home. These will definitely include the current markets, the amount of wear and tear on the home and any changes in the neighborhood. The fair-market value will play into the depreciation. The home is only as valuable as the price people will pay for it. Of course, the seller will need to be willing to accept that price, too.
If you are considering buying or selling a piece of property and the current economy is in a recession you might want to consider buying. During a recession people will not buy as quickly or as much as they normally would. This causes the homes to depreciate, and the prices of homes will fall. This also can cause the number of homes for sale to increase, and the selection will be greater.
There is only one way to accurately measure real estate depreciation: to take a large sample of homes in the area that have been sold and compare those to previous sales the same homes might have had. This is a process that can take a large amount of time and can be tedious. There are not many people who have the time, patience or the resources to accomplish this task.
Another way to measure the depreciation of a home that is fairly accurate is to concentrate on the average price per square foot instead of the average home prices.
Related real estate articles on Depreciation: