School me on home value appreciation if you would please

I've always heard that you want to purchase the smallest/least expensive home in the best neighborhood.

I think appreciation is generally pretty consistent on the lower and higher priced houses in a neighborhood. The resale-ability of the higher priced houses is a harder sale when you get ready to sell. People who have money to buy the highest price house in the neighborhood are usually shopping where that priced house is more in the middle tier of the surrounding homes.

On the contrary, it would be arguably easier to improve the value of a house priced on the lower end.

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I'm looking at a home that I'll be in for 5-10 years

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Without knowing anything about the area this house is located, and removing external factors that may radically increase (ex. covid) or decrease (ex. sub-prime mortgage collapse) home value. You will be around breaking even at 5 years and a little profit at 10 years.

You have to recoup the closing costs and home improvements. If you do a 30 year note, after 10 years 80% of your payments was just to interest. If you can do a 15 year, after 10 years 73% would have gone to loan balance.

You are looking at around $1000/month between 30 year and 15 year payment. Price and interest rates obviously make it impossible to give exact. Investing a $1000/month for 10 years with a 10% annual return will net $204,844.

Agreed. And beyond just the house, there are some things you can't change, like which direction the lot faces, whether it backs up to a green space or water or not.

Chasing appreciation isn't the way I've ever put on my top 5 in any of the houses I bought. It was the house, the lot, the backyard, etc.

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f you do a 30 year note, after 10 years 80% of your payments was just to interest.

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So you've paid off 20% of the loan balance, but you've also gained equity from the home value appreciation.

Say you take out a $350k mortgage and 10 years later you've paid off $70k of that balance. In the same time, assuming home values go up about 2-3% average per year, thats another 25% in appreciation. So when you sell, that's over $150k between appreciation and loan balance being paid off...minus whatever expenses you had for closing costs, maintenance, repairs, and improvements. Unless you did major renovations or there was a 2008-like housing market crash, you're almost assuredly coming out well ahead compared to renting and not building any equity over those 10 years

All valid points.

As to insurance, property taxes, and normal maintenance costs…..if you’re renting then you’re still paying those costs indirectly because the landlord is factoring those costs in for the monthly rent they’re charging.

Home appreciation the last few years has been out of this world.

Way above historical norms.

A home you live in is a place to live not an investment.

If you live in a home that has appeal to others it’s easier to sell.

There are numerous variables that make it difficult to answer, but my experience is that homes in a neighborhoods appreciate similarly, but the most desirable homes sell faster and can appreciate faster. I say similarly, but not necessarily equally. Improvements to a specific home can help appreciation, but it would be hard to quantify ahead if time with any certainty. The appreciation difference is usually negligible. The ability to sell it more easily can be important.

What will occur a few years down the road is speculation and an individual house can always buck trends since it only takes 1 buyer to agree to buy your house.

If you are planning to stay in the house 10 years, then buying one you can afford on a 15 year mortgage will increase the likelihood that it turns out favorably from a financial perspective. The interest paid between the 2 mortgages is significant. This decision has to include the opportunity cost of what you would do with the difference in payments, though.