Calculate real value of real estate

[boyle_heights]

When trying to calculate what the real value of a property would have been had there been no bubble, what kind of appreciation rate should I use?
For example, there is a home in an area I would like to purchase in that was sold for 200k in late 1999. I used 5% appreciation to come up with a current value of about 295k. Does the 5% seem correct?

Thanks.

[gdcox]

Hi,
The metric you need is income. Real estate shows the closest relationship to income levels over time; ideally incomes in that town/city. The data Rich has supplied shows SD household income rose by about 44% so …. 280K which is close to your numb.

The only other thing to watch out for is
1) was the real estate market high or low in late 99( see Rich’s graphs to judge)

and , if your analysis is made to reach a buy/sell decision,

2) this market may well under shoot fair LT value for months or even years due to the weight of foreclosures

[Doofrat]

I think Rich used 2005 income increases of 4.6% on one of the bubble primer charts, but it was probably lower this year.
The $200,000 amount is only what somebody paid for the house in 99′, not what it was worth, so doing a calculation for fun is fine, but I wouldn’t base any decision on it. It’s almost ten years later and your target house and neighborhood are ten years older and the economy is in disarray unlike in 99′. Try finding out what rent for an equivalent house would be and use the Price to rent ratio from 99′ of about 11 or 12.

http://piggington.com/has_price_to_annualized_rent_ever_been_normal_in_san_diego

So Sleepy….

[gdcox]

Graham

Good idea doofrat, though judging from what some patiently waiting landlords on these pages say, the ratio will have to be a lot lower before they move this time The value generated from 11 or 12 might be the value the property rises too after the market hits bottom: ie along term valuation.

[gdcox]

Graham

Good idea doofrat, though judging from what some patiently waiting landlords on these pages say, the ratio will have to be a lot lower before they move this time The value generated from 11 or 12 might be the value the property rises too after the market hits bottom: ie along term valuation.

[gdcox]

Graham

Good idea doofrat, though judging from what some patiently waiting landlords on these pages say, the ratio will have to be a lot lower before they move this time The value generated from 11 or 12 might be the value the property rises too after the market hits bottom: ie along term valuation.

[gdcox]

Graham

Good idea doofrat, though judging from what some patiently waiting landlords on these pages say, the ratio will have to be a lot lower before they move this time The value generated from 11 or 12 might be the value the property rises too after the market hits bottom: ie along term valuation.

[gdcox]

Graham

Good idea doofrat, though judging from what some patiently waiting landlords on these pages say, the ratio will have to be a lot lower before they move this time The value generated from 11 or 12 might be the value the property rises too after the market hits bottom: ie along term valuation.

[Doofrat]

I think Rich used 2005 income increases of 4.6% on one of the bubble primer charts, but it was probably lower this year.
The $200,000 amount is only what somebody paid for the house in 99′, not what it was worth, so doing a calculation for fun is fine, but I wouldn’t base any decision on it. It’s almost ten years later and your target house and neighborhood are ten years older and the economy is in disarray unlike in 99′. Try finding out what rent for an equivalent house would be and use the Price to rent ratio from 99′ of about 11 or 12.

http://piggington.com/has_price_to_annualized_rent_ever_been_normal_in_san_diego

So Sleepy….

[Doofrat]

I think Rich used 2005 income increases of 4.6% on one of the bubble primer charts, but it was probably lower this year.
The $200,000 amount is only what somebody paid for the house in 99′, not what it was worth, so doing a calculation for fun is fine, but I wouldn’t base any decision on it. It’s almost ten years later and your target house and neighborhood are ten years older and the economy is in disarray unlike in 99′. Try finding out what rent for an equivalent house would be and use the Price to rent ratio from 99′ of about 11 or 12.

http://piggington.com/has_price_to_annualized_rent_ever_been_normal_in_san_diego

So Sleepy….

[Doofrat]

I think Rich used 2005 income increases of 4.6% on one of the bubble primer charts, but it was probably lower this year.
The $200,000 amount is only what somebody paid for the house in 99′, not what it was worth, so doing a calculation for fun is fine, but I wouldn’t base any decision on it. It’s almost ten years later and your target house and neighborhood are ten years older and the economy is in disarray unlike in 99′. Try finding out what rent for an equivalent house would be and use the Price to rent ratio from 99′ of about 11 or 12.

http://piggington.com/has_price_to_annualized_rent_ever_been_normal_in_san_diego

So Sleepy….

[Doofrat]

I think Rich used 2005 income increases of 4.6% on one of the bubble primer charts, but it was probably lower this year.
The $200,000 amount is only what somebody paid for the house in 99′, not what it was worth, so doing a calculation for fun is fine, but I wouldn’t base any decision on it. It’s almost ten years later and your target house and neighborhood are ten years older and the economy is in disarray unlike in 99′. Try finding out what rent for an equivalent house would be and use the Price to rent ratio from 99′ of about 11 or 12.

http://piggington.com/has_price_to_annualized_rent_ever_been_normal_in_san_diego

So Sleepy….

[gdcox]

Hi,
The metric you need is income. Real estate shows the closest relationship to income levels over time; ideally incomes in that town/city. The data Rich has supplied shows SD household income rose by about 44% so …. 280K which is close to your numb.

The only other thing to watch out for is
1) was the real estate market high or low in late 99( see Rich’s graphs to judge)

and , if your analysis is made to reach a buy/sell decision,

2) this market may well under shoot fair LT value for months or even years due to the weight of foreclosures

[gdcox]

Hi,
The metric you need is income. Real estate shows the closest relationship to income levels over time; ideally incomes in that town/city. The data Rich has supplied shows SD household income rose by about 44% so …. 280K which is close to your numb.

The only other thing to watch out for is
1) was the real estate market high or low in late 99( see Rich’s graphs to judge)

and , if your analysis is made to reach a buy/sell decision,

2) this market may well under shoot fair LT value for months or even years due to the weight of foreclosures

[gdcox]

Hi,
The metric you need is income. Real estate shows the closest relationship to income levels over time; ideally incomes in that town/city. The data Rich has supplied shows SD household income rose by about 44% so …. 280K which is close to your numb.

The only other thing to watch out for is
1) was the real estate market high or low in late 99( see Rich’s graphs to judge)

and , if your analysis is made to reach a buy/sell decision,

2) this market may well under shoot fair LT value for months or even years due to the weight of foreclosures

[gdcox]

Hi,
The metric you need is income. Real estate shows the closest relationship to income levels over time; ideally incomes in that town/city. The data Rich has supplied shows SD household income rose by about 44% so …. 280K which is close to your numb.

The only other thing to watch out for is
1) was the real estate market high or low in late 99( see Rich’s graphs to judge)

and , if your analysis is made to reach a buy/sell decision,

2) this market may well under shoot fair LT value for months or even years due to the weight of foreclosures

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