Time frame a key in appreciation Some areas where values didn't rise much in past are now soaring

Nation's Housing

April 13, 1997|By Kenneth R. Harney

THE NAME of the game in home value appreciation, according to a new federal statistical study, isn't simply location, location, location. It's time frame.

Depending on the time frame you look at, the top average appreciation rates for American home values have been in Maine (up a torrid 18.6 percent annualized rate in the last quarter of 1996), Michigan (up 9.2 percent for 1996 as a whole), Utah (up 73.6 percent during the past five years), or Massachusetts (up a net 217.3 percent since 1980, despite several years of decline in the late 1980s and early 1990s).

The new study is based on a "repeat sales" analysis of 6.9 million home sales and refinancing transactions during the past 22 years. All homes in the study were financed with mortgages owned or included in securities sold by Fannie Mae and Freddie Mac -- the two largest sources of home mortgage money in the country. The study was conducted by the Office of Federal Housing Enterprise Oversight.

For short-term high appreciation, according to the study, the economically rebounding Upper Midwest and Rocky Mountain states have been the most profitable places to own a home in the last 12 months. Besides Michigan's 9.2 percent average appreciation gain per home last year, Nebraska properties moved up an average 7.8 percent gain, South Dakota 6.4 percent, Indiana 6.1 percent and Ohio 5.6 percent.

Homes in booming Utah were up an average 8.3 percent last year. Homes in Montana gained an average 7.9 percent, while Colorado homes appreciated by 6.2 percent.

Stepping back to a five-year perspective, the list of top gainers changes only slightly: Utah is No. 1 (up 73.6 percent), followed by Oregon (55.8 percent), Colorado and Montana (each 53.1 percent), Wyoming and South Dakota (each 40.7 percent).

The top performer list changes radically, however, over an extended period -- from 1980 through 1996. If you bought a home, for example, in 1980 in one of the 1990s hot spots, like Utah, how would its net increase in resale value compare with other markets? Here's the answer: A home bought in Utah in 1980 would have more than doubled in resale value since then -- up 121.8 percent. That's not bad, but how does it rack up nationally?

Not even top 10. The most profitable state to have bought a home in 1980 and sold it in 1996, according to the study, was Massachusetts (up an average 217.3 percent). Granted, an owner of such a home would have experienced a few hair-raising moments during the course of the 17 years -- from double-digit, superinflationary inclines in the mid-1980s to sharp declines from 1989 through 1993. The peak appreciation point in Massachusetts came in the fourth quarter of 1989 -- up 221.5 percent from 1980.

But Massachusetts' steady economic diversification and growth

in employment since the mid-1990s are still contributing to solid, not spectacular, value gains -- up an average 3.7 percent during 1996, and up an annualized rate of 6.8 percent in the fourth quarter of 1996.

The second highest net appreciation rate from 1980 through 1996? It might surprise a few owners there, but it's New York -- where the average home has gained 180.7 percent in resale value since 1980.

The rest of the top 10 for the 1980-1996 time period: Rhode Island (up 152.3 percent), New Jersey (145.3 percent), Connecticut (135.6 percent), Washington (131.1 percent), Delaware (130 percent), Oregon (127.9 percent) and Maine (125.2 percent).

What about the flip side of the story -- where have home values increased the least since 1980? Oklahoma real estate -- hard hit by recession in the 1980s -- gained the least on average during the 17-year period (up just 27.5 percent). But there are strong signs of a turnaround under way in Oklahoma. During the past five years, average resale values are up 20.7 percent -- accounting for the bulk of the state's post-1980 appreciation. In 1996, Oklahoma saw a 3.1 percent gain in average resale value, putting it just a hair below the national composite average of 3.4 percent for the same period. Second lowest appreciation rate since 1980: Texas (up just 34.8 percent), a victim of recession and the S&L crisis of the late 1980s. Wyoming is in third place, up 40.4 percent, but it is experiencing a dramatic improvement -- up by 40.7 percent since 1992.

Pub Date: 4/13/97

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.