Recently, a reader asked about the average home appreciation rate in Tallahassee.
Rather than provide a mere number, I have prepared a comprehensive report on average rates for several different key time periods.
How To Measure Average Home Appreciation Rates
Believe it or not, there is more than one method for calculating the average home appreciation rate.
Many websites will show average home prices over time, then calculate the change in price.
While this method might be generally valid over a long period of time, it is seriously flawed as a method of determining appreciation.
Average home prices are a reflection of what buyers are paying for homes. There are many things that influence the change in price of homes, value is a big one. But so too are changes in mortgage interest rates and the ease or difficulty in obtaining a mortgage loan for the purchase of a home. The change in home sizes also impacts the change in prices. Other factors impact home prices too, but these are the big ones.
Another method (and the one that I most prefer) is to compare average home values over time. Home values, measured in price per square foot, better represent "what the sellers get." Almost everything that influences the change in the price per square foot of homes is value related. This method works best with lots of data, as small samples won't necessarily reflect true market performance (the price per square foot of a home on 100 acres will not compare well with one on a zero lot line). But if you gather ample data, then the average price per square foot gives you the best understanding of the real estate appreciation in your local market.
Average Home Appreciation Rate In Tallahassee
In order to answer our reader's question, (you can see the one-page newsletter than prompted his question here), I used information from all recorded existing single family home sales in Tallahassee from January 1991 through May 2017. This means:
- Only single family detached homes were included (no condominiums or townhouses)
- No new construction sales were included
- All recorded home sales (not merely sales in the Tallahassee MLS)
In order to be as accurate as possible, I took the one year average from the past and compared it with the current one year average. As an example, to get the average home appreciation rate from May 1992 to May 2017, I measured the average from June 1991 through May 1992 and then compared it with a measurement of the average from June 2016 through May 2017. Here are the results:
From 1992 to 2017, the average home appreciation rate in Tallahassee has been 3.42% per year. This means a home that was selling for $47 per square foot in 1992 is now selling for $109 per square foot.
But we know there have been market cycles, so I wanted to see how they impacted appreciation.
- The average home appreciation rate in the 1990s was: 3.90% per year
- The average home appreciation rate in the 2000s was: 5.00% per year
- The average home appreciation rate from 2002 through 2007 was: 9.60% per year
- The average home appreciation rate from 2007 through 2012 was: -6.06% per year
- The average home appreciation rate since 2012 has been: 4.21% per year
Future Home Appreciation Rates
I think you are safe to assume an average annual appreciation rate of roughly 3.5% per year if you plan to hold on to your home for 20 or more years.
If you are thinking about buying and selling fairly soon, I would expect an annual appreciation rate of better than 5% for the next five years, and then the potential for lower or even negative rates if we see values shoot up fast like they did from 2002 through 2007.
Remember, you cannot determine your home's value with an online valuation that simply uses price per square foot, but you CAN use these tools to get a good feel for the general direction of the market. If you calculate your home's value one year and see that the overall market has risen, it is very likely that your home rose in value too during that time (unfortunately, the opposite is true as well).
If you would like a FREE, no-strings-attached valuation of your Tallahassee home, simply drop me a note and we'll be in touch right away to get the details of your home and the improvements that have been made, if any, since the time that you purchased the home.
Joe Manausa, MBA is a 26 year veteran of real estate brokerage in Tallahassee, Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.