Author Topic: long term appreciation rate for US real estate  (Read 393 times)

Frugalman19

  • Bristles
  • ***
  • Posts: 257
long term appreciation rate for US real estate
« on: November 20, 2017, 05:11:05 PM »
I have been searching for reliable long term appreciation rates on residential real estate for the US and cant find them. Some are saying that the long term return is 9% and others say its 3.1% before inflation and basically only keeps up with inflation on an adjusted rate.

Does anyone have some reliable rates of return I can access, it would be really awesome if it were per major city, but by state or even the whole us will do.


robartsd

  • Handlebar Stache
  • *****
  • Posts: 1085
Re: long term appreciation rate for US real estate
« Reply #1 on: November 20, 2017, 05:16:34 PM »
Most assume long term appreciation matches long term inflation.

waltworks

  • Magnum Stache
  • ******
  • Posts: 2510
Re: long term appreciation rate for US real estate
« Reply #2 on: November 20, 2017, 07:29:24 PM »
This has been studied by Robert Shiller, who came to the conclusion (there are a lot of ways to quibble with the end result, as the data used for the early part of the 20th century is *really* spotty) that residential real estate basically tracks inflation:
http://www.econ.yale.edu/~shiller/data.htm

You can of course earn huge returns in real estate, since the market is nowhere near as efficient as the stock/bond markets, and there's a bunch of free gov't cheese (artificially low interest rates/cheap leverage) available. But you can't just buy 1000 random houses and expect to do awesome 20 years later, like you can by buying index funds.

-W

clarkfan1979

  • Handlebar Stache
  • *****
  • Posts: 1548
  • Age: 38
  • Location: Kauai & Denver
Re: long term appreciation rate for US real estate
« Reply #3 on: November 25, 2017, 08:31:20 AM »
Real estate returns are going to very different based on leverage. Someone who puts 5% down is going to have much larger returns than someone who puts down 20%.

Average real estate appreciation keeps pace with inflation. However, you can do much better than inflation with leverage.

afox

  • 5 O'Clock Shadow
  • *
  • Posts: 17
Re: long term appreciation rate for US real estate
« Reply #4 on: November 26, 2017, 09:50:04 PM »
Sounds like the OP might be confused between the difference between rate of return and appreciation.  Rate of return is the return on your investment (down payment or cash if buying RE with no mortgage).  Appreciation is the increase in value of the property.  Appreciation averages out to about inflation in the long term.  Also, I dont believe appreciation rates include maintenance and necessary remodeling/upgrade costs.  As others have noted, rate of return can be be much higher than appreciation due to leverage.  Of course leverage can result in a negative rate of return as well.  A 9% rate of return on a downpayment could be conceivable given usual mortgage down payment (20% with no PMI) and average appreciation.