Housing Prices Map
Aside from during the recent recessions, housing prices have been climbing fairly steadily throughout the past several decades. Using data provided by the Federal Housing Finance Agency, we've built the below tool to demonstrate historic state by state housing price changes. Simply select a state, a purchase year (data goes back to 1975) and the amount paid in that year to see how much that house would be worth today if it appreciated at the same rate as housing across the rest of the state.
Someone starting out with $ today and adding $ each year will end up with $ after years at an average growth rate of %. If your estimated return was actually 2% higher than your actual return, you'd still end up with $. If, on the other hand, your estimate was conservative by 2%, you'd amass $. While you can't perfectly predict or control the return you'll get, you do have one lever: there is a significant trade off between expected return and risk.
About This Calculation
Green states have appreciated more than the state you selected, and red states have appreciated less. Black states have appreciated comparably. This data is based on an index that encompasses all housing transactions across the state. As you could imagine, this calculation will lose accuracy as you stray away from average priced homes (e.g. mansions don't necessarily follow the same trends as standard houses). This tool was build using the Federal Housing Finance Agency's quarterly home price index.
According the the U.S. Census Bureau, the average american over 65 has about $130,000 of value in home equity and a median net worth of around $170,000. The portion of wealth tied up in home equity is similar for other age ranges. Lucky for most americans, even after the housing crash and financial crisis of 2008, average home prices have risen quite a bit over the past few decades. Of course, how well someone fared in their investment had a lot to do with where they bought property. In 1975, the median price for a house in The United States was around $150,000. Let’s take a look at how well people would have done investing $150,000 on a home in some of the best, and some of the worst performing states.
It won’t come as a surprise to most that The Golden State has earned its name, landing the top spot for hot real estate. $150,000 in 1975 would have bought a very lucky investor a home that could sell for almost $2 million today.
The South has lagged behind the rest of the country in terms of home price appreciation over the past several decades, with Mississippi being the worst performer. $150,000 spent in 1975 on a home in Mississippi would be worth just over half a million today. That implies annual appreciation of about 3%. It may sound like investing in real estate in even the worst state would have been profitable, and nominally that’s true, but when you factor in the high inflation of the 70s and the relatively high inflation of the 80s, the average Mississippi real estate investor would have lost value over the past 4 decades.
Overall, U.S. housing prices have climbed fairly steadily over the past 4 decades. On the whole, U.S. home prices are currently near their pre-crash levels. While many areas have not fully recovered, average home prices are about 7 times what they were in 1975. That implies an annual return of about 5% excluding all the costs of owning a home, which sounds especially good after considering how much money homeowners save on top of that 5% simply by not having to pay rent.
One of the first things that come to most people’s mind when talking about the total cost of homeownership is maintenance costs. A general rule of thumb that gets thrown around quite a bit is that 1% of a home’s value is needed for maintenance on average each year. A home’s market value is only a very rough indicator of maintenance costs though. Everything from the home’s age to what kind of things you have built into the home need to be considered when budgeting for maintenance.
Another important consideration is property taxes, which vary not only from state to state, but can even be different from city to city. According to taxfoundation.org, total effective property taxes across the state range from a low 0.28% in Hawaii to a high 2.38% in New Jersey. At the average New Jersey home price of around $300,000, 2.38% is over $7,000/year on property tax alone.
One last point regarding the value of homeownership: the value of having a place to live. It might seem obvious, but many people focus on the total return when comparing investing in a home against investing in the stock market or any other investment vehicle. If you’re deciding to purchase your first home after renting, factor in all the savings from not paying rent and the value of being isolated from rental rate fluctuations. If you’re upgrading to a larger or nicer home, factor in the value to you and your family of all the years you’ll spend in the new home.
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