Powayseller –
I don’t understand why something greater than 4% appreciation from the base year of 1997 unrealistic ?
I suggest you go to the Piggington home page and read the two primer articles and look at the charts. If you do so you will see that in 1997 home prices were about 30% below their mean value in terms of price to income ratio. If you believe in mean reversion it works both ways. If you do the math and assume incomes go up at about 3%, you’ll see that to go from 1997 to the same ratio as the previous peak results in about 7-8% appreciation. Not 4%.
Maybe Jim added his 3% commission to a realistic 7% appreciation number to come up with 10%.
I also went back and computed the effective compounded increase in home prices in SD county from 1982 to each year from 1983 through 2003. The lowest number I got was an effective 3.8% return from 1982 to 1996, which was at a low in housing. The typical numbers ranges in the 5-6% range.
I suggest that 4% is too pessimistic (housing bear) and 10% is too optimistic (realtor). I’d say 7-8% from a market bottom (e.g. 1997)is realistic.
