Even More Statistics

As a follow up to the previous post regarding statistics, it might be interesting to poke a little deeper. As we view the year-to-year statistics on appreciation, we are often awed by what appears to be the huge increase in home values in many of our communities. One of the factors which are often ignored is the effect of teardowns on these rates. As an example, during the past several years, homes that were valued at $400,000 - $500,000, were torn down and replaced with new homes that sold for approximately 3 times the cost of the original house. These numbers can be reduced or increased based on the price of the “before” and “after” project. In our example, this displacement shows up in the statistics as a sale one year, at half a million dollars, and a sale on the same property the next year at a million and a half. Multiply this by the number of teardowns that we have seen in recent years, and you will see a phenomena that plays a major role in skewing the statistics. It would be interesting to only view the appreciation rates for existing homes.
Yes, there has been a great deal of appreciation over the past several years, but perhaps it has not been as extreme as the numbers might indicate.