Annualized appreciation for Boulder County

               Last month we talked about how Boulder County has appreciated over time since 1978 based on the data from the Federal Housing Finance Authority. One of the follow-up questions I got from that article intrigued me. The question asked what the average annual appreciation rate was for Boulder County? Knowing this number would be helpful in researching rental properties, financial planning, retirement planning and just for general knowledge.

               A quick estimation with the colleague that asked the question made me realize the answer wasn’t simple. Our hypothetical average Boulder County home appreciated about 740% over the 37 ¾ years that I analyzed the data. 740% divided by the 37 ¾ years led me to a close to 20% a year appreciation rate. That didn’t seem right and then it dawned on me that I wasn’t compounding the appreciation rates. Some Google searches for a compounded interest rate formula later, I came up with an answer that seemed more accurate. Over the last 37 ¾ years, the average Boulder County homes has appreciated at a 5.44% average annual rate.

               While it was nice to have this average rate, I thought others might want to know the best and worst case scenarios. The best one year appreciation rate that Boulder County has experienced since 1978 according to the FHFA data was 29.64%. That appreciation happened from the second quarter of 1981 through the second quarter of 1982. Interestingly, the worst case scenario didn’t happen during the Great Recession, but also happened in the early 80’s. From that same second quarter of 1982 through the second quarter of 1983, Boulder County saw depreciation of 6.12%. Since the best and worst case scenario all were dependent on the second quarter of 1982, I was somewhat suspicions of that data point. If we throw out that data point, the best and worst case also happened in the early 80’s. My assumption then, not having worried about Boulder County appreciation when I was in elementary school in Florida, is that was just a very volatile period in the price history of Boulder County.

               During the Great Recession, the worst case scenario we saw for Boulder County prices was depreciation at the rate of 2.95% from the first quarter of 2009 to the first quarter of 2010. A much more recent comparison and probably a much more accurate gauge of the worst case scenario. During the late 90’s and the early 2000’s upswings, we hit annual appreciation rates in the 14-15% range multiple times, also probably a much more accurate gauge of the best case scenario.

               One caveat to this analysis is that the FHFA data is constantly changing. Every quarter FHFA releases their most up to date analysis and the index figures are constantly being revised as more paired sales are added to their database. The most recent quarters can experience the largest revisions of up to a percentage point but the older data remains fairly stable. FHFA just released HPI data for individual zip codes and I can’t wait to dig into that data for future analysis. Have a great summer!

Posted on June 8, 2016 at 4:16 pm
Michael Malec | Category: Uncategorized

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