if i buy a house in the midwest for 100,00 what are the chances of the property value going up in the next fiv

Answer 1

We bought our house four years ago for $129,900. According to the appraisal we just received, it is now worth $170,000 and we haven't done any remodeling, there's no deck and the bare minimum for landscaping. We live in a part of St. Charles County (in Missouri) that is rapidly expanding.

Answer 2

It depends on many factors.

Historically, housing price appreciate as fast as inflation. That is looking at the market as a whole. There are always exceptions.
For example, California real estates appreciated double digits growth in past 3 years while Texas housing only got single digits growth.

For next couple years, Texas housing market is inclined to appreciate more than California market. While California housing market continues to slump, Seattle is booming due to booming local economy.

To answer your question, 5 years is enough time that should there be a correction, you can probably ride it through. And at the end of 5 years, there is a good chance your property will have a gain in value. However, we don't know the percentage.

How to value a property during market downturn?

Housing market continues to slump. Now we can calculate true value of a property easily. As price decline, we don't need to guess and factor in the potential price appreciation while calculating home value. Without the guesswork, figures are more accurate.

Let's use following example:

Today, a typical 15 years old, two bedrooms condo/townhouse is priced around $500,000 and $550,000 in Sunnyvale, California. Rent for similar condo/townhouse is $2000/month.

If you are a home owner, $2,000/month in rent means $20,000 a year in profit ($24,000 per year in rent, minus $4,000 maintenance costs). A $20,000 income is equilevant of owning $400,000 bonds or CDs, because current yield of 30 Years U.S. treasuries are 5% (5% of $400,000 is $20,000). Bank CDs have similiar yields.

In our example, the two bedrooms condo/townhouse is 20% to 25% overpriced. They should be priced at $400,000.

It is interesting to note that if we redo the calculation from buyer's perspective instead of seller's perspective, the figures are even more shocking.

Mortgage payment consists of two parts: mortgage interests and mortgage principal. The interests portion is similar to rent. If you pay interest, it disappears and doesn't add equity to the property. To fully simulate characteristics of renting, we assume buyer will apply for a zero down, interest-only loan.

It turns out that rent of $2000/month is equivelant to mortgage payment of a $340,000 loan at 7.0% APR. And comparing $340,000 loan to $500,000 or $550,000 price tag, from buyer's view, the two bedrooms condo/townhouse is 30% to 35% overpriced.

One may ask, why is there a discrepancy between two perspectives of the buyer and owner?

The discrepancy is a result of 2% differences in interest rate that buyer borrow comparing to yields of bonds and CDs that owners would get. We understand that buyer would always pay more. That is the premium of buying to own. However, looking from home owner's perspective, current housing market is probably 20% to 25% overpriced. We recommand investors to wait for a better entry point.

Answer 3

A lot. The midwest's housing market is booming right now.

Answer 4

Very good. Nearly all real estate properties go up in value.

Answer 5

Very Good, most property values increase...

Answer 6

I would say count of 5% a year for sure. If nothing else cost of building supplies will keep home value pointed upward.

These are good websites for questions on mortgages:
http://www.diversifiedlender.com/
http://www.minnesota-mortgage-rates.net/

Answer 7

mine went up alot in 2 years

Answer 8

very good ......although you wont see the type of appreciation you might in the southwest .

best of luck !

Answer 9

it will go up, but not that much. I'll be nice and leave it at that.