Average Annual Appreciation Rate Based

Upon Year Bought & Year Sold
Portsmouth, NH (1999 to June 2008)

This is a study of home price appreciation based upon houses and condominiums in Portsmouth that sold twice. The difference between the two prices is the amount the home appreciated. The upper table summarizes the annual average rate of appreciation for roughly 400 condos and the lower table summarizes the annual average rate of appreciation for roughly 300 houses. The rows show the year of the initial purchase and the columns show the year of resale. Figures shown in bold had fewer than six sales in that sample and may be less reliable.

These are all annual averages. Therefore, if the houses that were bought in 2003 and resold in 2006 appreciated at an average annual rate of 8.3%, but those bought in 2003 and resold in 2007 average 4.5% per year, we know that appreciation in 2007 was low enough to cut the average in half! There are too few sale / resale pairs that cover 2005 to 2007, but with what little data there is, it is clear that prices were essentially flat. There is possibly some decline, but it just doesn’t appear yet.

Now look at the chart below, prepared by the New Hampshire Housing Finance Authority. It depicts the median price of all sales in each year. This type of analysis can be influenced simply by what properties sold in that year. For example, if in one year, many units in The Cedars sold and very few units in Tidewater sold, but in the following year, the reverse occurred, the NHHFA survey would show an increase in median price. The increase would not be indicative of any economic force, but simply due to which properties sold. There are generally enough sales that the results are not significantly skewed. I mention this only to point out that my survey and the NHHFA survey use two different methodologies, but show generally the same conclusion: If the local market has collapsed, nobody has told the buyers and sellers.

In the past few months I have performed this same analysis, but on a much smaller basis, for appraisals of houses in Newmarket, Exeter, Dover, Hampton and Durham. I saw the same thing in all five towns: If prices are plummeting, I sure can’t see it. At worst, all I see is a decline of maybe 3% to 5%, on average, from 2006 to June 2008. Please … that is simply too small a decline to reliably measure.

Keep in mind that while we are mourning the loss of maybe 10% of our home’s value over the past two years, our homes are still worth more than double what they were in the late 1990s! If this news is still depressing to you, I must stress two facts. First – in order to make or lose money on any investment you must both buy it and sell it. If you are not selling your home, you have not lost any money.

Second, your home is not an investment – it is shelter. It is also where you relax and where you make memories. Satisfying these needs is first and foremost. Once that’s done, if you can actually make some money when you go to sell your house, that’s a bonus. If you must look at this as an investment, you should figure out the cost versus return on having children. You will see that you will lose your shirt there also. Some things in life can not, and should not, be reduced to dollars and cents. Before you decide that you have “lost money” on your house, don’t forget to attribute some value to the other things it provided. Value what you have.