37 fewer houses were sold Sept 2014 than the previous September, but prices are up almost 12% year/year!

The $40,000 median price increase blows away the conservative 2% appreciation I use in my pro forma to estimate future property values.

I use 2% because I know real estate prices will at least keep pace with inflation, but this increase plainly demonstrates the Kamloops market is outpacing the 2% Bank of Canada target.

Conservative estimates are prudent, but it is nice to get this type of surprise! July house prices were up 2.5%, so I am curious to see what the entire year of 2014 median price increase will be.

What this means for investors

A 2% appreciation means a $350k house is worth $7000 more. 3% is $10,500, and 12%(like last month) is $42k!

In fact, my neighbour just sold for $417k. 20 years ago homes in my neighbourhood sold new for less than $180k new. Do the math and the average annual appreciation over 20 years has been 12%!

Whatever the 2014 appreciation number is, I am happy with only 2%, because with my rental properties, 2% appreciation = 10% Return On Investment!

$350k house with 80%LTV means $70k invested. 2% appreciation is $7000.

$7k / $70k is 10% ROI !

12% appreciation is $42k. $42k/ $70k = 60% ROI!

To learn more about the power of leverage, read this article.

Until next time,

Stay S.A.F.E.