According to the latest Fannie Mae Home Purchase Sentiment Index (HPSI), Americans are feeling very discouraged about buying homes right now.
“Consumer sentiment toward buying homes reached the lowest level in our survey’s 10-year history; unsurprisingly, respondents overwhelmingly cited the lack of supply and high home prices as primary reasons for their pessimism,” said Doug Duncan, senior vice president and chief economist for Fannie Mae, in a press statement.
Although prices are undoubtedly rising, the good news is that most properties still have a lot of potential. At Realm, we measure potential by understanding what a property could be worth with various upgrades & improvements.
How we calculate a property’s potential
Our models follow a three step process:
- Review each home — We analyze hundreds of attributes about each home, including categorical and numeric data such as square footage, quality of appliances, bed/bath ratio, and lot size
- Analyze the neighborhood — We analyze the attributes of high value homes nearby to determine the optimal characteristic for each attribute, where optimal is defined as what is valued within the local market
- Calculate what’s optimal — We compare each house as it is to what the house would be with all the optimal attributes
Nationwide, the average single-family home has $175,900 of untapped potential value. Untapped potential compares Realm’s estimate of potential home value to our estimate of current home value.
Potential value varies significantly across the county based on lot sizes, zoning restrictions, and market supply & demand. The good news is even cities with sky-high home prices have significant untapped potential. These 10 cities top the list:
|1||San Francisco, CA||$700,350|
|2||Santa Barbara, CA||$673,864|
|9||Los Angeles, CA||$366,968|
|10||San Jose, CA||$363,421|
Look up the median untapped potential in your city:
Untapped potential by city
- Only. includes cities with more than 25,000 single-family homes
- Potential value & current value are both calculated by Realm’s proprietary algorithm
- Each city data point is calculated by looking at the median of potential value vs. current value for each house