What to expect for home appreciation

Real Estate Agent with Neighborly Realty

Hi Neighbors,

When you are purchasing or remodeling a home one of the things to consider is appreciation.  What will the value of my home be in 5 or 10 years?  In the past couple of decades, we've seen some incredible swings.  Overall during the past 7 or more decades home prices have kept pace with inflation and most people buying a home did so because of life style reasons rather than as an investment.  The Los Angeles Times recently publlished an artlce that sums up what some economists are predicting over the next few decades.

Housing Economists Predict Slow Growth
The fundamentals that drove the increase in housing values for the last century - increasing population, incomes, and household wealth - may not follow in the United States in the future. Some housing experts speculate this will change the economics of homeownership.

Over the next few decades, "We can expect a gradual rise [in home values], but not the bonanza we've become accustomed to between the end of World War II and 2006, and especially the last 20 years," says Robert Reich, public policy professor at UC Berkeley and U.S. Labor secretary in the Clinton administration.

The reasons for the change include the absence of pent-up demand that followed the Great Depression and World War II and the aging of the baby boomers who carried that housing demand forward, says housing consultant Thomas Lawler.

Source: Los Angeles Times, Peter Y. Hong (09/27/2009)

This is an interesting article and is of course only one prediction.  Other things to consider is that left and right coast prices often rise more than the interior.  Also, some area that have been hit the hardest such as Sacramento and some areas around Los Angeles may (in my estimation) recover a bit more than other areas because right now they are clearly below the historic appreciation points expected without the 'bubble'.  In addition, there is continued population increase in California that will put more pressure on home prices.

The bottom line is that if your a home owner or planning to be one look at a home as a long term investment and include the tax advantages (consult your tax accountant) of home ownership.  Investors also need to justify purchase of a property on the basis of a conservative market and not expect to make a windfall from appreciation.

Thanks for reading,

Neighborly Realty



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Steve Andrascik
Lake Mead Area Realty - Boulder City, NV

You are right, Jeff. Home appreciation will never be what it was.

Sep 29, 2009 06:33 AM #1
David Monsour
Keller Williams Keystone Realty - Gettysburg, PA
ABR - www.realty-insights.com

Jeff, I think this is a good outlook on what we can expect.  I do not believe that we have hit bottom yet.  NAR is broadcasting commerials sharing your same statistics that the economists believe we will see an increase over the next 5-10.  I'd love for this to be the case considering my infantile investments are not appreciating in value, and haven't since I purchased them.  However when looking at comps for listings recently, nothing is selling at list price which means a trend of price drops to continue for now.

One thing that intriques me is the cost to build a new home is not decreasing, but the value of existing homes is falling at a decent rate.  Obviously builder profit margins are taking a serious hit.  I'm quite interested to see how people get financing for new construction if the values keep falling like they are now. 

Hey maybe people will actually have to put money down again.

Sep 29, 2009 06:38 AM #2
michelangelo vasco
mvp realty inc. - Manhattan, NY

the days of 10% appreciation a year are gone for now but in the long term there is still no better investment than a home.

Sep 29, 2009 07:15 AM #3
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Jeff Engle

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