Math Is Fun Forum

toben

Guest

Estimate home appreciation from sales price per square foot

I have a real life problem for you. I need the appreciation rate of a neighborhood to help decide how much a house may be worth.

I converted a list of house sales price and the size to get the square footage of the houses.

Now I have the following price/sq foot numbers and years the houses sold.

How would I get an average appreciation for the neighborhood?

1995 $38.69
1997 $34.47
1998 $38.03
1999 $42
2001 $37.06
2001 $36.67
2004 $28.56
2005 $43.79
2005 $58.57

I think the houses appreciated between 2 and 3 percent a year but how do I get an exact average?
I tried to do a correlation but ended up confused as to how I would back out the appreciation rate.

Thanks in advance!

mathsyperson

Moderator

Registered: 2005-06-22

Posts: 4,900

Re: Estimate home appreciation from sales price per square foot

It looks to me like there isn't really a trend in the prices, and they're just fluctuating from year to year. However, if you want to only consider the points from 1995 and 2005, then you'd calculate the average percentage increase like this:

Divide the later price ($58.57) by the earlier one (£38.69) to get the later price as a percentage of the earlier one. $58.57 ÷ $38.69 = 1.5138... ≈ 151%

Now take the 10th root of that to spread it over ten years:

Therefore, each year's price is 104.23...% of the previous year's and so the average percentage increase is ≈ 4.23%.

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Why did the vector cross the road?
It wanted to be normal.

toben

Guest

Re: Estimate home appreciation from sales price per square foot

That formula only estimates first and last points.

How would I average all the points together to get an estimated appreciation.

Thanks,