[author note: Shortly after I wrote this article I also wrote another newer article with More on Historical Home Appreciation that covers specific price data going back to the late 1800's. So you may want to check out that article as well. Also see the article Historical Home Prices By State]
Right now homes are generally losing value or at best staying flat. A few years ago home prices were increasing by double digits annually in many markets across the nation. Neither of these are normal situations. We've experienced first a boom and now a bust. This kind of cycle is both normal and not. Prices are going to go through cycles of ups and downs over the yeas. So we'll keep seeing cycles of booms and busts of varying sizes. But over the long run increases of +15% or losses of -15% are not going to be the typical changes in home prices.
So what is the average change in home prices historically?
This is a little tricky to find. I did a lot of searching on Google and I wasn't able to find an authoritative number over a long period of history. The best I found was the price history from 1963 to 2008 and some spotty data from previous decades.
From historical home price information on the Census website. I analyzed the data at this Google docs spreadsheet.
From 1963 to 2008 home prices increased an average of 5.9% per year.
But this only covers a four decade period of history. It would really be best to have data going back to the 1920's or longer so that we have a longer historical trend. Unfortunately I can't find median home price data going back before the 1960's. [as noted above I later found more historical price info and post about that in More on Historical Home Appreciation]
I was able to find this interesting site The PeoplesHistory.com with the page Home and Property Prices that has example prices for each decade. So you can look at the page for the 1920's and see home prices were in the $2000 to $5000 range for that decade. Or in the 1930's page they show that homes sold for $2000 to $9000 in that decade. We can use these numbers to give us a rough estimate of the average annual % increase over time. For example if we estimate the cost of a home in 1920 at $3500 and then compare it to a $230,000 home price today in 2008 then that comes out to about a 5% annual increase. similarity if we look at the 1930's prices and estimate a cost of $5500 for 1930 then it gives us a 4.9% average annual increase to get to today's prices.
If you combine the census data for 1963-2008 and the sample information from older decades then I think its a pretty decent estimate to say that prices increased 5% annually. Admittedly this is not a perfect number since I don't have solid data before 1963.
May 6, 2008
How fast do homes appreciate historically?
Labels:
historical,
real estate