Key Takeaways
- Long-term residential appreciation averages 3-4% nationally — extrapolating recent 10%+ gains leads to dangerous overvaluation.
- The 2008 crisis was amplified by the widespread belief that prices could not decline significantly.
- Model financial projections using long-term averages as the base case and 0% appreciation as the downside.
- Study at least one full market cycle (10-15 years) before investing in any market.
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Test Your Knowledge
1.What is the long-term national average for annual residential home price appreciation?
2.How did recency bias contribute to the 2008 financial crisis?
3.What appreciation rate should you use as a base case for financial projections?