Considering inflation, most Franklin County homes have lost relative value since 1970

Many people think of Central Ohio and Franklin County as having a booming real estate market. But an analysis of average owner-occupied home values in 1970 and 2018 shows that—adjusted for inflation—real estate has not been a good investment for people in many neighborhoods.

Out of more than 250 census tracts in the county, 162, or 65%, showed a decrease in inflation-adjusted owner-occupied home values. In 28 tracts, or 11%, home values are more than double what they were in 1970.

Overall, owner-occupied Franklin County homes have seen a $25,332 inflation-adjusted increase in average home value, from $146,172 in 1970 to $171,504 in 2018 (both adjusted for inflation to May 2020 dollars). This indicates that in terms of averages, the county has been a good investment for homeowners. But the figures break-down when scrutinized more closely to show that the intense appreciation at the top of the market has pulled the average higher, while the majority of homes have not actually appreciated when considering inflation. Similarly, inflation-adjusted home values across Ohio increased from $135,000 in 1970 to $144,816 by 2018.

For example, in 1970 there were 764 owner-occupied homes in Census Tract 57 (German Village area), and 1,059 in 2018. In 1970, the average value of an owner-occupied home there was $12,442. Adjusting for inflation to May 2020 dollars, that would be $84,394.

However, 2018 data shows the median value of an owner-occupied home in Census Tract 57 was $344,600. Adjusting again for inflation to May 2020 dollars, that would be about $356,477. From $84,394 in 1970 to $356,477 in 2020 is an increase of 322%.

Conversely, most census tracts have seen owner-occupied home values depreciating, considering inflation.

Take census tract 7.3 (South Linden), where the 842 owner-occupied homes in 1970 had an average value of $13,893—higher than German Village. Adjusted for inflation to May 2020 dollars, that comes to $94,232. However, the average 2018 value of the 477 owner-occupied homes in the tract was just $48,500, which comes to only $50,172 when adjusted to May 2020 dollars. This is a 47% loss in value over 50 years. For South Linden homeowners, real estate has not been a profitable investment.

This exercise highlights how rapidly neighborhoods change. In 1970, South Linden was a peer neighborhood with a similar market entry level to German Village. Today, that’s not the case. In the particular case of German Village, government-imposed architectural regulations have protected and potentially inflated property values through its historic district designation. Neighborhoods without this type of public policy protection haven’t seen the same level of property appreciation and financial gain.

Some neighborhoods that seem stable have actually devalued over time, like Berwick.

For example, northern Berwick (Census Tract 27.8) had an average home value of $36,545 in 1970, which would be $247,878 today. Instead, homes there are worth an average of $195,100. This is a relative decrease of 21% over 50 years. The Berwick example shows that neighborhoods once on the higher-end of the market change throughout the decades, and even become stagnant or depreciating investments.

This is when we should consider that our neighborhoods aren’t just stock markets for individual investors, rather they’re communities that are the settings for our lives. Earning money from one’s home is just one aspect of homeownership, but it’s one that is disproportionately enjoyed by those in exclusionary neighborhoods.

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Recently-sold homes in Berwick. Source: Zillow.com

These comparisons don’t take into consideration the investment put into an individual home.

It’s important to remember that this data is at the census tract level and represents averages for all owner-occupied homes. Data for individual homes is not analyzed here, and neither are costs of maintaining or upgrading homes. While many of the homes in appreciating census tracts have likely received considerable investment, it’s likely that many homes in stagnant or depreciating tracts have not been adequately maintained. In part, that may be because investing in upgrades in a home located in a stagnating or depreciating neighborhood wouldn’t be a good return on investment. Furthermore, tracts with depreciating owner-occupied home values have typically seen a major reduction in the total number of owner-occupied homes from 1970 to 2018, potentially indicating a market influence of landlord-owned properties in those areas.

Top 5 Appreciating Neighborhoods, 1970 to 2020

Top 5 Depreciating Neighborhoods, 1970 to 2020

The relative reduction in home value in the majority of Franklin County tracts shows that buying a home pays off only for people in certain neighborhoods, which are largely more white and affluent.

Homeownership, which many consider to be part of the fabled “American Dream,” is a vehicle to build equity over decades for only a select group of people. Many others, as shown by the data, are losing value by participating in the so-called American dream.