Historical rents and property appreciation rates, over long term?

2 Replies

Obviously, the person to come up with a calculator to estimate "the market" to perfection will have discovered the golden ticket and would never give it away for free! But for the rest of us, there must be useful approximation techniques to understanding the local real estate markets.

I come primarily from the conventional stock and bond portfolio world, where historical dividend yield rates and price appreciation rates are common knowledge for various segments of the market: S&P 500 for domestic large cap, FTSE ex-US for international, Barclays for bonds, etc. I like to be informed of the long run of the market before jumping in, and I hope to bring that philosophy into real estate.

How granular can the data get, say for the metropolitan area level, for metrics such as inflation-adjusted rent (for 1 br? 2 br? 3 br?) over the past 30+ years? Property value appreciation rate (for 1 br? 2 br? 3 br? Single family? Multi-family?) over the past 30+ years? Population rates (people moving in or moving out)? What about at the county level? Or the municipal level?

I am most interested in looking at various markets and comparing these rates. Is this a fool's errand? I know Zillow's metrics are not widely lauded for their accuracy. So for the data-driven in you, using what sources do you look to find long term real estate data to estimate appreciation and rent?

Real estate is not like the regular stock and bond market. My dad is a financial advisor and likes real estate, but is always significantly more calculated with each move because real estate isn't nearly as liquid as stocks and bonds. 

I would like to give you some hope that there is opportunity to find comparable rates, but I think it's a bit of a fool's errand. If you look at the Portland market, they have had a significant jump post recession. Blame it on "Portlandia". Blame it on the affordability. Blame it on the "keep Portland weird". Blame it on the fact that it is attractive to millennials. It's a matter of poison, not right or wrong. Atlanta, Denver and Austin have also seen great returns post recession. Is it for the same reasons that Portland has come back? I'm sure historians/anthropologists will dissect this into something tangible in the future. 

I personally like unique assets. I'm in a coastal town and know that the closer I am to the ocean, the more inherent value I have along with a number of other factors. In my particular area this also means that it is typically the spot that comes back the fastest and has the lowest vacancy. Is it the right fit for everyone? Absolutely not. 

Either way, check out Bill McBride's blog because he is the best and if you like numbers, he will become your God/Eric Clapton/Michael Jordan/Warren Buffet/Bill O'Neil... I think you catch my drift. Calculated Risk Blog

@Ryan Hebert I think it's a good idea to compare rent and price appreciation between markets. However, getting as granular as 1br, 2br, etc, is a fools errand. I doubt you'll be able to find that specific information. I really doubt there's a big difference between appreciation between 2 and 3 bedroom units in the same metro.

You can break it down to detached single family, attached and multi units (2-4 and 5+).

Getting more detailed than that hits a point of major diminishing returns. I'll send you over data that we put together for the Denver metro. It's published every quarter and is a good balance between details and the big picture. Hopefully it'll help you put the puzzle together.

Definitely look at population and job growth for the future! If an area has declining population, I will not invest there. Bottom line, if there are no people to rent or live, your asset is not going to appreciate. I don't care if it cashflows great... if it's in a declining area what happens to your IRR when values and rents don't appreciate? You know the answer... inflation eats you away!

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