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View Poll Results: What's your appreciation rate?
Uh, we live in Texas 26 20.00%
4% A $100,000 home will be worth $324,340 in 30 years 45 34.62%
5% A $100,000 home will be worth $432,194 in 30 years 10 7.69%
6% A $100,000 home will be worth $574,000 in 30 years 11 8.46%
7% A $100,000 home will be worth $761,226 in 30 years 1 0.77%
8% A $100,000 home will be worth $1,006,266 in 30 years 9 6.92%
9% A $100,000 home will be worth $1,326,768 in thirty years 3 2.31%
10% A $100,000 home will be worth $1,744,940 in 30 years 3 2.31%
11% A $100,000 home will be worth $2,289,230 in 30 years 1 0.77%
> than 11% and I'm not telling 10 7.69%
Voted "negative" appreciation. 15 11.54%
Multiple Choice Poll. Voters: 130. You may not vote on this poll

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Old 02-13-2008, 10:54 AM   #41
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Listen, I like real estate - I've owned multiple homes over the years and did pretty well (except during the early 90's). But I think it's not realistic to think that there are predictable 'higher appreciation areas'. Consider your 4% vs. 11% example. That's a differential of 7%, which would mean that the same $ investment in the 11% area would roughly double the value of the 4% area investment every 10 years. Over 50 years, that would be roughly a factor of 32!

So think about this - let's say you thought a certain area in Hawaii could predictably run 11% appreciation, and a certain area in Kansas City could predictably run 4% appreciation. Let's say you start with a home in Hawaii at $1,000,000, and a home in KC at $200,000, so the Hawaii home is 5 times the value of the KC home. In 50 years, you're saying the place in Hawaii would be worth 5*32=160 times the place in KC. That's exceeding difficult to believe.

It's even crazier if you work it backwards - the same assumptions would mean that, 50 years ago, the home in Hawaii was worth 5/32=.15 times the place in KC (otherwise it couldn't be worth 5 times the value now).
Actually if you took the $1,000,000 Hawaii property at 9%(my initial figure) back to 1958 it would sell for about $13,500. That figure seems reasonable. Now if you had a $200,000 property in KC at 4% then the sales price in 1958 would be about $3,000. That figure seems reasonable when you look at the 1950's prices below.

So yeah it looks like one area can appreciate at 9% a year at the same time another will only appreciate 4%. At least over 50 years!
http://www.thepeoplehistory.com/50s-homes.html


1959 Maine
Brick House good residential area 12 rooms 4 baths 2 acres
$7,000

1955 JoplinMissouri
5 room modern ranch house with 2 bedrooms fully insulated on 3 acres
$6,600
1959 Salisbury Maryland
5 room Bungalow with 2 bedrooms living room dining room modern kitchen full basement with hot air heating
$7,000
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Old 02-13-2008, 12:36 PM   #42
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I voted I lived in Texas becasue that we are like them in Missouri. Our home doubled but it took 20 years.
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Old 02-13-2008, 01:08 PM   #43
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It's not that hard to predict that areas with lots of jobs, greenbelt-limited growth, desirable climate, and cultural opportunities will continue to appreciate faster than average.

Zillow maps ups and downs of housing prices
"That's a steeper drop than throughout the nation, where all homes are down 3 percent year-over-year, Zillow said."

Free4 now, when I read the article you referenced yesterday in the Chronicle this statement stuck out!! If ALL homes are down just 3% YOY why are we talking bubble/credit crunch/ bailout/30% drops?

I'm thinking someones gonna make out on this faux crisis.
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Old 02-13-2008, 03:43 PM   #44
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The housing market is very different from the stock market... everyone gets crazy if prices decline over one small area. When prices decline (on average) over an area as big as the USA people are up in arms.

Most people can't even wrap their brains around the possibility that prices could drop as much as they have risen over the last decade.
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Old 02-13-2008, 05:09 PM   #45
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I hope I won't sound too stupid, but I am not quite sure how to answer the question. You are talking about appreciation without taking into account cash flow right? So you don't count taxes, repairs, improvements, insurance costs in your calculation? What about if you made a lot of improvements to the house over the years (additions, new kitchen, new bathroom...)? Your house could have appreciated a lot because of the improvements and not necessarily because of appreciation in the local RE market. How do you account for that? Thanks. As soon as I understand it better, I will answer the poll.
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Old 02-13-2008, 05:18 PM   #46
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what about the fact if you had a 30 year mortgage depending on your rate and down payment you may have paid 2 to 3x the purchase price
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Old 02-13-2008, 05:37 PM   #47
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what about the fact if you had a 30 year mortgage depending on your rate and down payment you may have paid 2 to 3x the purchase price

And those things affect appreciation HOW? That's what makes appreciation so FANTASTIC! It is the same no matter the terms of your financing.
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Old 02-13-2008, 05:47 PM   #48
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I hope I won't sound too stupid, but I am not quite sure how to answer the question. You are talking about appreciation without taking into account cash flow right? So you don't count taxes, repairs, improvements, insurance costs in your calculation? What about if you made a lot of improvements to the house over the years (additions, new kitchen, new bathroom...)? Your house could have appreciated a lot because of the improvements and not necessarily because of appreciation in the local RE market. How do you account for that? Thanks. As soon as I understand it better, I will answer the poll.
I'm basically looking at all things being the same "then" as "now". In my specific examples I've spent minimal, mostly paint and carpets and new appliances. When you start to compare "additions" you lose the comparability. My architectually designed addition in a NBHD of simillaty improved properties will probably appreciate better than your 500sf addition "stuck" on the back of your 1500sf sized NBHD when now you're the largest home by 25%.

Most kitchen and bath remodels in my experience mainly help homes sell quicker and possibly at a higher value but where you spent $50K on your country french kitchen most buyers will only give you credit for the physical vs the cosmetic upgrades.
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Old 02-13-2008, 06:24 PM   #49
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I'm basically looking at all things being the same "then" as "now". In my specific examples I've spent minimal, mostly paint and carpets and new appliances. When you start to compare "additions" you lose the comparability. My architectually designed addition in a NBHD of simillaty improved properties will probably appreciate better than your 500sf addition "stuck" on the back of your 1500sf sized NBHD when now you're the largest home by 25%.

Most kitchen and bath remodels in my experience mainly help homes sell quicker and possibly at a higher value but where you spent $50K on your country french kitchen most buyers will only give you credit for the physical vs the cosmetic upgrades.
So much for "my" fictitious country french kitchen and the eyesore addition to "my" 1500sqft sized Home... You obviously have better taste than me...

I vote for 4% pure appreciation in my area. Medium size city in the south. Generally healthy economy but very dependent on government spending.

After costs (including taxes, repairs. insurance, but not financing costs or voluntary improvements), probably only 1% annual return on investment. With financing costs included, easily negative return on investment. I don't see my home as an investment at all, more as a liability. We bought a fairly cheap house so that we could free more money to invest elsewhere. It doesn't mean that I think all RE investments are bad investments. My parents seem to have done very well with theirs.
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Old 02-13-2008, 09:00 PM   #50
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I read an interesting statistic in today's San Diego Union. Nearly half of all homes that were sold in the county last month were sold at a loss. The median loss on these homes was 25%. The median home price in the county is now what it was four years ago. Again, I believe that San Diego was one of the first real estate markets experience a bubble and likewise is one of the first markets to go into free fall. Many regional markets if they haven't already, will follow in much the same manner.


SignOnSanDiego.com > News > Metro -- Distressed properties dominate market
Despite the decline, the median price of a house in San Diego county is still not affordable -- $451,500.
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Old 02-13-2008, 09:03 PM   #51
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I didn't vote because there's nowhere for 2.6%. I guess Anchorage is kinda like Texas.
I was just counting price paid when we bought in 1982 vs estimated value now, not taking into account maintenance costs (didn't keep track of them) and value of rent payments avoided.
I guess you'd better hope I don't move to Hawaii, Honobob, I might bring my lousy real estate luck with me!
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Old 02-13-2008, 09:16 PM   #52
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I'm basically looking at all things being the same "then" as "now". In my specific examples I've spent minimal, mostly paint and carpets and new appliances.
Yup! landlords tend not to spend a lots of money on upkeeps in highly demanded areas. My sister-in-law has been living in the same apartment in Monterey Park, CA for over 10 years. The building has never been painted, the roof has never been replaced, the electrical wires have never been tugged away from the eves of the building, and the carpets have never been replaced. In short, improvements or repairs are virtually nonexistent. Rents, however, go up every year by more than 6%. Her landlord says repeatedly, "If you do not like the increase in rent, you are free to leave since there are many people on the waiting list."
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Old 02-13-2008, 10:00 PM   #53
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I didn't vote because there's nowhere for 2.6%. I guess Anchorage is kinda like Texas.
I was just counting price paid when we bought in 1982 vs estimated value now, not taking into account maintenance costs (didn't keep track of them) and value of rent payments avoided.
I guess you'd better hope I don't move to Hawaii, Honobob, I might bring my lousy real estate luck with me!
Nah! Come on down. My next door owner of my first place in Diamond Head was from Alaska. She spent the winters in Honolulu. She would share the best smoked Salmon. She was from a very weathy family that I thought were big in Anchorage in the lumber (home building) business. Her name was Schuman. Owned a few nice condo's in Honolulu and even after she sold in Diamond Head the management kept track of her until she died at her daughters in Missouri.

I always thought that Alaska real estate was on par with Hawaii. Are you sure your math is correct? At 2.6% appreciation a property in 1982 worth $40,000 would be worth $78,000 today.

Aloha
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Old 02-13-2008, 10:37 PM   #54
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here's the annual appreciation history on my house from 1965 to date based on purchase prices:

1965-1968 36%
1968-1972 18.5%
1972-1977 8.5%
1977-1994 5%
1994-2008 12%

how does this tell me what might happen into the future?
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Old 02-13-2008, 10:48 PM   #55
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Nah! Come on down. My next door owner of my first place in Diamond Head was from Alaska. She spent the winters in Honolulu. She would share the best smoked Salmon. She was from a very weathy family that I thought were big in Anchorage in the lumber (home building) business. Her name was Schuman. Owned a few nice condo's in Honolulu and even after she sold in Diamond Head the management kept track of her until she died at her daughters in Missouri.

I always thought that Alaska real estate was on par with Hawaii. Are you sure your math is correct? At 2.6% appreciation a property in 1982 worth $40,000 would be worth $78,000 today.

Aloha
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Thanks for the invite. Too bad I'm not from a wealthy family, it would be easier I think.
Yep, my math is correct, I checked with your example.
There was a pipeline building boom, then a bust. Pretty much anyone who bought in Anchorage from about 1980 to 1985 timed it very badly. The closer to 1985, the worse. We bought in 1982. If only we'd happened to move to town four years later! Things were so cheap in 1986 and 1987, DH talked about buying a nicer house. But we were underwater on our mortgage, it was early in our careers, and I was too chicken. Maybe I should try listening to him once in awhile, eh?
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Old 02-13-2008, 11:55 PM   #56
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I'm not sure I understand the original question, but I went ahead and answered the poll: 10%. We bought our house in 1991 for $67,900, and now in 2008 it is worth $340,000 (according to the houses I see selling around here, and according to zillow.com). I think that works out to an average increase of 10.5% per year. But I'm not too sure of my math.
We live in a pretty "hot" real estate area--the Pacific Northwest--but I doubt the prices will continue to rise at this rate over the next 17 years.
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Old 02-14-2008, 11:16 AM   #57
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NYC has been around 10% over the last 25-30 years

what this means is that RE will double or triple in a 5-7 year period and then drop by 30% to 50% and then remain flat for a few more years. repeat.

i've talked to people that bought in the late 1980's or 1990 and were upside down for a long time. and i've seen people that bought at the bottom of the cycle and paid off their home in a few years.
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Old 02-14-2008, 11:58 AM   #58
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Well, it's only investing if you have money in the market. Didn't you cash out when property was 30% cheaper?
Only 30% cheaper?

We just bought a house (OK 4 months ago,) that we're rehabbing. We got it for 50% below market value (death in the family and it was absolutely hideous).
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Old 02-14-2008, 12:03 PM   #59
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I'm not sure I understand the original question, but I went ahead and answered the poll: 10%. We bought our house in 1991 for $67,900, and now in 2008 it is worth $340,000 (according to the houses I see selling around here, and according to zillow.com). I think that works out to an average increase of 10.5% per year. But I'm not too sure of my math.
We live in a pretty "hot" real estate area--the Pacific Northwest--but I doubt the prices will continue to rise at this rate over the next 17 years.
Actually, that's a CAGR (compounded annual growth rate) of 9.94%.

Ours is at 8.26% CAGR ($200k in mid-2000, and $370k early 2008).
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Old 02-14-2008, 02:40 PM   #60
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Also don't forget that some appreciation, especially recently, is hedonic improvements paid for HELOC loans. When I moved into my condo complex 10 years ago, nearly everyone had the original super-tacky faux-antique chandelier hanging in their dining room and tile countertops.

When I sold a decade later, everyone almost without exception had replaced the chandeliers, and most had granite countertops. I would estimate that the average owner had spent 10% of the condo's value on improvements and repairs over the last few years.

I especially notice this effect when I tour high end luxury open homes. Almost every one has trendy kitchens that were redone in the last 5 years and which will surely look dated in another 5 years. We all know that luxury homes appreciate more than lower end homes, but I wonder if that isn't balanced by the huge sums that owners spend constantly redecorating.
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