The REAL Real Estate Appreciation Rate

[Marquette]

Upper midwest... lots of buildable land, urban sprawl, metro area.

I predict a rate of inflation increase after a correction in the market. ie, more like the 50 years before the recent run-up for our market. I would suspect the best areas for future growth (near term at least) would be areas with net population growth and / or scarcity of resources (land or labor).

Current townhouse was purchased in 2002. Comp sales for other townhouses show a high water mark of 7% straight appreciation (not CAGR). If we sell it at our current price it will be 3% straight appreciation. (and it's uglier once we subtract broker fees).

[FUEGO]

I don't really know the rate for my area. Over 30 years, my house appreciated between 4 and 5% per annum depending on whether you look at the sales price in 1975 or in 1984.

Since I bought in 2003, I'm sitting on 12% per year appreciation. Obviously not sustainable long term.

What will change appreciation rates here? Those things I mentioned already. No idea which of those if any will happen. 30 years is a long time. Who knows, where I live might be a slum in 30 years (appreciation will be less than inflation) or it might be the next up and coming hot place to live (appreciation 2-5% greater than inflation). I'd put even odds on either outcome happening within 30 years.

[eridanus]

No one could have looked at Houston home prices in the late 80s and predicted a negative rate of return over the next 20 years. It happened though.

Hawaii - With the increasing cost of fuel and the supply of cheap oil about to peak (see Shell email), I predict the ROR will be at inflation.

Vegas - Like Houston, it has a lot of open land. It also has water issues. It's toast - stick a fork in it. Negative ROR.

[honobob]

Quote:

Originally Posted by eridanus No one could have looked at Houston home prices in the late 80s and predicted a negative rate of return over the next 20 years. It happened though. Hawaii - With the increasing cost of fuel and the supply of cheap oil about to peak (see Shell email), I predict the ROR will be at inflation. Vegas - Like Houston, it has a lot of open land. It also has water issues. It's toast - stick a fork in it. Negative ROR.

Doesn't anybody read the poll question? Appreciation RATE!! Not ROR, Not cash flow, etc.!!

Eridanus, when's the last time you were in Vegas? They are building up against the mountains.

Hawaii? Where will the locals live? How will oil prices affect their shelter decisions? Didn't we live out this whole oil shortage in the 70"s?

[eridanus]

nm

[Meadbh]

Sold family home after 43 years of continuous occupation: annualized IRR 12.8%. Not in the US.

[rec7]

I voted I lived in Texas becasue that we are like them in Missouri. Our home doubled but it took 20 years.

[honobob]

Quote:

Originally Posted by eridanus No one could have looked at Houston home prices in the late 80s and predicted a negative rate of return over the next 20 years. It happened though.

Did it?
According to neighborhoodscout.com Houston appreciated 5.83% per year since 1990, 6.89% over the last 10 years, 5.31% over the last 5 years, 5.63% over the last 2, 4.46% over the last 12 months and up to 5.09% over the last quarter!

So the mean is maybe mid 5%?

But Houston is a big diversified place. Honobob ALWAYS suggests buying in established NBHD's like Leeland/Bastrop. 72% of housing between $73,000 and $147,000. AND an annual appreciation rate of 23.47% each and every year over the last 18 years!!

[free4now]

Quote:

Originally Posted by honobob Did it? According to neighborhoodscout.com Houston appreciated 5.83% per year since 1990, 6.89% over the last 10 years, 5.31% over the last 5 years, 5.63% over the last 2, 4.46% over the last 12 months and up to 5.09% over the last quarter!

Funny how we look at things differently honobob. Just for kicks I went to neighborhoodscout.com, entered Houston, TX and right below the map of city center it said "Since 1990 Total appreciation -4.61% and Yearly appreciation -0.26%"

Now I'm sure you know of some neighborhood that did better so I'm not questioning your numbers, but you seem to rarely see the half empty part of this glass.

[honobob]

Quote:

Originally Posted by free4now Funny how we look at things differently honobob. Just for kicks I went to neighborhoodscout.com, entered Houston, TX and right below the map of city center it said "Since 1990 Total appreciation -4.61% and Yearly appreciation -0.26%" Now I'm sure you know of some neighborhood that did better so I'm not questioning your numbers, but you seem to rarely see the half empty part of this glass.

Free4now Tried to check myself but their servers down. Their site is tricky in that sometimes you need to back completely out to change cities. I post the web address so anyone can check. I could have gotten it wrong but I don't think so. I check the city generaly and then the best neighborhoods. I'm not saying their aren't NBHDs in most areas that do not appreciate. I specificly questioned the practice of investing in a cheaper part of town.

[honobob]

Free4now here ya go cut and pasted. Exactly as i earlier reported.
Since 1990104.92% 5.83% 52Last 10 Years68.86% 6.89% 63Last 5 Years26.56% 5.31% 32Last 2 Years11.26% 5.63% 36Last 12 Months4.46% 4.46% 56Latest Quarter1.27% 5.09%

[twaddle]

Honobob, your poll says "... home will be worth...."

You only want to poll fortune tellers who can tell you forward appreciation rates, right?

Peak oil + global warming means that Alaska should have the highest appreciation going foward. The weather will be nicer. There's oil under all that snow. And they'll have an increasing supply of waterfront property too.

You can change your username to YukonBob.

[honobob]

Quote:

Originally Posted by twaddle Honobob, your poll says "... home will be worth...." You only want to poll fortune tellers who can tell you forward appreciation rates, right?

Hello!! Asking for historical appreciation rates. Oh wait, you knew that based on your first post. So Twaddle, share some numbers on your real estate investments. What has been the appreciation rate on the house you're in over the last 30 years?

[twaddle]

The house I live in didn't exist 30 years ago. In the 4 years I've owned it, it has doubled according to comps, so I guess that means 20%/year. Does that mean you want to buy it? I hope so, because nobody else is buying in my market right now.

Waterfront. 30 minutes from a major urban center. Am I a genius or what?

Remind me how smart I am next time I have to pay my property taxes.

[unclemick]

1977 to 1994, New Orleans East duplex, 6.02%. Then I ER'd and retired from the landlord stuff.

heh heh heh - as to the future north side of Kansas City - ? - not sure I care. Fairly competitive with rent - here two years so maintenance is a guess.

[Bikerdude]

Last 30 years = 5%(in my area). So I vote 5% for the next 30.

[Spanky]

In general, appreciation of real-estate keeps pace with inflation except in a few insane areas, such as the SF Bay Area, Hawaii, and New York City because these people are loaded with $$$ or desperate to live these places.

[lazygood4nothinbum]

doesn't it all depend on which year you buy and sell even within each market. my inherited house would have gotten 7.5-8% at bubble peak, but now i'll be lucky to get 6 to 6.5% over 28 years. i've checked out about 10 or more similar properties in that area and the appreciate rates ranged anywhere from 3% to 35% in any two to 30 year period.

on my personal house i'm likely at an annual appreciation rate of 12% currently (over 14 years) and probably could have gotten 14-14.5% at bubble peak but this area was revitalized from crack town to gay central over those years and so i certainly would not expect even the lower percentage to continue into the near future. hard to judge though because this house is in central area of a built-out county.

who knows. as potable water becomes more dear, the value of existing houses might as well.

[Moemg]

My house waterfront florida has appreciated 11.5 % in the six and a half years I 've owned it . This takes into account the recent drop in real estate .During the good years the appreciation was over 20 % .

[Retire Soon]

I find it very exciting to gaze into my crystal ball of future real estate prices. To be sure, one can make a lot of money on buying and selling a house at the right time. Certainly, areas such as San Francisco and Hawaii have a better chance for appreciation. That said, I think we need to remind ourselves that we're now in the midst of the worst credit bubble in world history. I believe that prices will eventually fall in every region of the U.S. Just because they haven't fallen yet in your area is no guarantee that they won't. Many areas will not bottom out for at least two years. When they do, what will interest rates be then? Don't forget that the purchase of a home takes money. Sure, it could be cash coming from wealthy people, but many times it requires financing. With that said, who will be able to qualify for first mortgage when lenders are now tightening credit even for those with good credit. What will interest rates be two years from now? Loans in the five and a half percent range could be history by 2010. Also, we need to consider inflation getting out of control. Rates could increase significantly at that point. Again, sellers of homes need buyers with money or no sale takes place. No matter how great an area someone owns real estate in, if a potential buyer cannot obtain financing, a home will simply not sell. If these conditions should persist for any length of time, prices will become stagnant or go up very little. We've been in a credit/housing bubble for the past five or six years and price increases will eventually revert to the mean of around 4%.