Over the past 6 months, you have learned the 6 of the 7 economic drivers of the residential real estate market. The seventh driver of our market is appreciation. (Missed the others or need a refresher? They are GDP, Federal Funds Rate, Interest Rates, Inflation, Unemployment, and Inventory). 

What is Appreciation?

Appreciation, in simple terms, is the increase in the value of an asset over time. It’s a fundamental concept that is central to the long-term value of buying real estate. As a Realtor, comprehending and communicating the nuances of appreciation can provide a considerable advantage in guiding your clients, including investors.

In Cincinnati, the historical appreciation rate hovers around 3% per year. While this might seem modest, especially when compared to the national average of 4%, it’s a steady and reliable growth rate that experiences far less volatility and fluctuations than bigger cities on the costs. This consistency is characteristic of the Midwest and is a crucial point to highlight when discussing investment upsides with investor clients.

Cincinnati’s Recent Raging Appreciation 

Over the past few years, Cincinnati’s appreciation rates have surged, at times hitting as high as 14% annually. To put that in perspective, at that rate, in a single year, properties in Cincinnati have gained almost five years’ worth of appreciation. This spike in appreciation is a direct consequence of the acute inventory shortage and historically low interest rates we witnessed over the past few years across the country. Those two factors (among others) have made the last few years the most extreme sellers’ market in history. 

However, it’s important to note the broader picture. While some areas, particularly coastal regions and states like Texas, have seen significant price drops this year, Cincinnati’s market has remained relatively stable. In fact, while places like Salt Lake City, Utah and Austin, Texas have experienced large decreases in average sales prices (known as ‘depreciation’ – as much as 20% in some areas), Cincinnati’s market has either held steady or shown slight appreciation.

Why This Matters to Investors

This pattern of steady growth makes Cincinnati, and the Midwest more broadly, highly attractive to risk-averse investors. The real estate market here doesn’t experience the dramatic volatility seen in other parts of the country. This stability is appealing to investors who prioritize cash flow and consistent growth over the uncertainty of more volatile markets.

Steady appreciation rates mean less volatility, which is particularly beneficial for those unsure of when they might need to sell or refinance their properties. It offers a degree of predictability and security that can be hard to find in more turbulent markets.

The Bottom Line

As a Realtor, understanding and effectively communicating these dynamics can set you apart. When working with investors, highlighting Cincinnati’s consistent appreciation rates, superior cash flow, and comparatively stable market can be compelling. It positions you not just as a real estate agent but as a knowledgeable consultant who understands the broader economic factors at play and how your clients can leverage them for their benefit.

If you have further questions about appreciation or other economic drivers in our industry, feel free to check out the other blog posts identified above. Understanding these economic concepts is key to building confidence in your industry knowledge and credibility with your Sphere, Clients, and Prospects.