One of my friends came to town to work some years ago and we tried to interest him in a home in our neighborhood. He chose to build in a quiet town not far from here. Five or six years later, the house we had in mind for him had increased in value by 35%. The house he built was appraised at about the same amount he spent on it.
The importance of appreciation is underscored in Chapter Five of The Owner-Builder Book
Four Ways to Make Money
"Traditionally, your house adds to your wealth in two ways. The most important way is through appreciation, which has averaged 5% per year in the U.S. for the past 25 years. This is a valuable source of gain, much better than a savings account. If you have a $300,000 house, and made a typical down payment of $30,000 to buy it, your 5% gain is measured against your $30,000 down payment. That returns $15,000 per year on $30,000 or 50%. Your savings account pays less than five percent on average.
The second way your home adds to your wealth is through retiring your mortgage. For most of us, this is a small but steady gain. If you hold a $300,000 mortgage, and you make $2,500 monthly payments, you reduce the mortgage by only $1,000 or $2,000 per year in the early years.
A house I bought in 1980 gained $85,000 of appreciation in twelve years, or $7,000 a year. I had also paid down my mortgage by more than $12,000, or $1,000 a year during the period. Compared to savings, this was a superior gain for us; but small compared to the gain afforded by owner-building."
As they say, the real estate appreciation is all about "location, location, location." Choose a spot for your home that the market will like far into the future.