Opinion: What is and what isn’t real estate appreciation
In the Incline Village/Crystal Bay region, “appreciation” is not an increase in average or median prices that happened over the past 12 months. In recent years, the average and median price for homes has fluctuated up and down due to a great percentage of buyers in different price ranges.
For instance in 2013, the number of buyers purchasing in excess of $2 million was 147% higher than in 2012. This resulted in a 23% increase in the average price over the previous year.
This is not appreciation. The average price comparison between 2015 and 2014 is a decrease of 5%. Let’s see how my appreciation analysis fares.
Appreciation is only the increase of value based on the passage of time, not improvements done to the property. This is my definition.
Here is method for determining appreciation rate:
1. I use McCloud units, which are 2 bedrooms, 2 baths, 1,089 and 1,100 square feet as a bellwether. In 2015, they appreciated 5%. This assists in getting a handle on approximately what the appreciation rate should be.
2. For arriving at an appreciation rate for homes, I compare those homes that sold in the last quarter of 2014 to homes that sold in the last quarter of 2015 to determine what the 2014 sale would be in 2015. By dividing the adjusted price of 2015 by what the home actually sold for in 2014, I come up with an appreciation rate for that home.
The result of analyzing all of the homes:
1. Homes valued under of $1 million, the appreciation rate is 2.2%
2. Homes valued between $1-2 million, the rate is 2%
3. Homes valued between $2-3.5 million, the rate is 4%.
My rates are subjective, but are carefully thought out. The process to determine the rates takes days to determine. The process involves careful consideration and evaluation of the data. This cannot be done with accuracy by a few key strokes of a computer.
Incline Village Realtor