Home Value Up or Down? Depends on the Time Frame

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% annualized rate in the last quarter of 1996), Michigan (up 9.2% for 1996 as a whole), Utah (up 73.6% during the past five years) and Massachusetts (up a net 217.3% 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 over 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% average appreciation gain per home last year, Nebraska properties chalked up an average 7.8% gain; South Dakota, 6.4%; Indiana, 6.1%; and Ohio, 5.6%.

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

Stepping back to a five-year perspective, the list of top gainers changes only slightly: Utah is No. 1 (up 73.6%), followed by Oregon (55.8%); Colorado and Montana (each 53.1%), Wyoming and South Dakota (each 40.7%), New Mexico (39%) and Idaho (37.9%).

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%. 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 in 1980 and sold it in 1996, according to the study, was Massachusetts (up an average 217.3%). Granted, an owner of such a home would have experienced a few hair-raising moments during that time--from double-digit, super-inflationary 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% from 1980--and hasn’t been reached since.

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But Massachusetts’ steady economic diversification and growth in employment since the mid-1990s are still contributing to solid, if not spectacular, value gains--up an average 3.7% during 1996, and up an annualized rate of 6.8% 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% in resale value since 1980. Like Massachusetts, New York took its lumps in the early 1990s. But unlike Massachusetts, the declines have never been for multiple years and the property value resale index is just a few points below its all-time high.

The rest of the Top 10 for the 1980-1996 time period: Rhode Island (up 152.3%), Hawaii (149.3%), New Jersey (145.3%), Connecticut (135.6%), Washington (131.1%), Delaware (130%), Oregon (127.9%) and Maine (125.2%).

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%). But there are strong signs of a turnaround underway in Oklahoma. During the past five years, average resale values are up 20.7%--accounting for the bulk of the state’s post-1980 appreciation. In 1996, Oklahoma saw a 3.1% gain in average resale value, putting it just a hair below the United States composite average of 3.4% for the same period.

The second lowest appreciation rate since 1980: Texas (up just 34.8%), a victim of recession and the S&L; crisis of the late 1980s. Wyoming is in third place, up 40.4%, but it is experiencing a dramatic improvement--up by 40.7% since 1992.

What about the single largest real estate market in the country? Here’s the scoop on California: For the full 1980-1996 period, California homes outperformed the national average--more than doubling (up 104.7% versus the 102.5% national average). The past five years, to no one’s surprise, have been down--minus 10.8% on average. But the last quarter of 1996 registered an above-inflation annualized jump of 3.6%. So maybe the home gain time frame for California is looking moderately positive again.

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Distributed by the Washington Post Writers Group.