What is often the most significant factor leading to lower property values?

Rising interest rates have a substantial impact on property values, often leading to a decrease. When interest rates increase, the cost of borrowing becomes higher for potential buyers, which can reduce the overall demand for homes. Higher mortgage rates make it more expensive to finance a home purchase, meaning fewer people can afford to buy homes at current prices. As demand diminishes, sellers may be forced to lower their asking prices to attract buyers, thus causing property values to decline.

In contrast, high demand typically drives property values up, as more buyers competing for available homes can lead to increased prices. Site location is crucial in determining property values, as desirable locations can maintain or elevate prices despite other economic factors. Home improvements often enhance a property's value rather than decrease it, as renovations and upgrades typically appeal to buyers looking for move-in-ready homes. Overall, rising interest rates create a significant barrier in the housing market that can lead to lowered property values.