I had always heard that real estate appreciates about 5% per year when a property is owned for many years, but I had never seen any hard data. I’m a big believer that you are likely to be wrong if you just assume that what you hear is correct (or make a guess without any real data).
Today I found this website which shows how much you would have earned for every $100 if it was invested in real estate in 1980. The website tracks 33 major markets, including St. Louis.
That 5% rate that I had heard was also supposedly a national estimate, and everyone knows that real estate is local. Some markets appreciate better than others over time.
How well do your real estate dollars appreciate in St. Louis?
If $100 was invested in real estate in 1980, it would have been worth $267.65 at the end of 2007 resulting in a 4.37% annual growth rate.
On average, property in St. Louis that was owned through 12/31/07 appreciated between 4.16% to 5.69% depending on how long the property was owned (see table below).
| Time owned | Annual ROI |
| 5 years | 5.66% |
| 10 years | 5.69% |
| 15 years | 4.95% |
| 20 years | 4.16% |
* ROI = annual return on investment
Looking at the charts, you can see that many cities had a sharp incline in prices in the late 1990s through 2005, followed by a recent fall.
But that’s not what happened in St. Louis. We have had a slow and steady increase, but there hasn’t been a quarter since 1994 when the average sale price was lower than the prior quarter!
In comparison, take a look at the high annual appreciation rates for some of the cities that are fueling the foreclosure crisis:
| City | Annual ROI |
| San Francisco, CA | 10.10% |
| Las Vegas, NV | 8.34% |
| Washington DC | 10.21% |
| Miami, FL | 12.00% |
| Phoenix, AZ | 9.40% |
* Based on 10 year ownership ending 12/31/07
Keep in mind that these appreciation rates reflect the recent market pullback. So, homeowners that have owned property for 10 years in the foreclosure cities are still way ahead even with the recent drop in prices. The owners that are really struggling are the ones that either pulled their equity out of their home based on overly inflated prices in recent years, or the unlucky ones that purchased at the market’s peak in 2005.
For a visual representation on why this type of growth can’t be sustained, take a look here.
So if you’ve been staying out of the market in St. Louis because you are waiting for prices to bottom out, maybe you should reconsider. Though there are definitely neighborhoods that have had price decreases, home prices in St. Louis are still climbing. It’s a good time to buy, and not as bad a time to sell as you might think.
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PDF Possibly Related Posts:
- What is the Appreciation Rate of St. Louis Condos?
- What is the Appreciation Rate of St. Louis Homes?
- What is the Appreciation Rate of Lake St. Louis Waterfront Homes?
- PMI Report – St. Louis Housing Market at Low Risk for Price Declines
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