Every rental calculator has a box for how fast prices rise, and almost nothing else on the page moves the answer as far. The one on this site starts at 3% a year. That is a convention, not a measurement, so it is worth knowing what the record actually shows before you leave it alone.
What has the average home appreciation per year actually been?
The Federal Housing Finance Agency keeps the longest free run of US house price data. Its all-transactions index for the United States goes back to 1975 and is updated every quarter. In the second quarter of 2026 it stood at 719.87. In the second quarter of 1975 it stood at 60.98 (FHFA house price index data).
Compounded across those 51 years, that works out at 4.96% a year.
Two warnings come attached. The figure is nominal, so inflation is still inside it: a 4.96% year when everything else cost 4% more was not much of a year. And it describes the whole country, which no single house does.
Shorten the window and the answer changes.
| Period | Index at the start | Index at the end | Average a year | |
|---|---|---|---|---|
| 10 years, from 2016 | 372.35 | 719.87 | 6.81% | |
| 20 years, from 2006 | 372.01 | 719.87 | 3.36% | |
| 30 years, from 1996 | 193.67 | 719.87 | 4.47% | |
| 51 years, from 1975 | 60.98 | 719.87 | 4.96% |
Four windows, four answers, from 3.36% to 6.81%. Pick the one that suits the deal you want to buy and you can justify almost anything.
The most recent reading is slower than all of them. FHFA’s quarterly release of 25 August 2026 reported prices up 2.1% between the second quarter of 2025 and the second quarter of 2026, up 0.3% on the quarter before, with the monthly index for June unchanged from May. That release uses FHFA’s purchase-only measure rather than the all-transactions series in the table, so the two do not line up exactly, but the direction is clear enough.
Why the ten-year and twenty-year rows look so strange
Read the first two rows of that table again. The index was 372.01 in the second quarter of 2006 and 372.35 in the second quarter of 2016. Ten years apart, a third of a point between them, which is 0.01% a year.
It did not sit still to get there. The series peaked at 380.31 in the first quarter of 2007 and bottomed at 308.14 in the second quarter of 2012, a fall of 19%.
So the 20-year row is low because it starts just before that, and the 10-year row is high because it starts at the bottom of the hole. Anyone who bought in 2006 and had penciled in 3% a year was not wrong about the long-run average. They were wrong about which decade they were going to get.
What does the growth rate do to a rental?
The example house costs $250,000 with 20% down on a 30-year loan at 7%, and rents for $2,750 a month. Vacancy is set at 5%, property taxes at $3,000 and insurance at $1,400 a year, with 5% of rent for repairs, 5% for replacements and 8% for management. Rents rise 2% a year in all three columns. Only the price growth changes: none, the 2.1% from the latest FHFA release, and the 3% the calculator starts with.
That puts $57,500 in up front and leaves $420 a month in cash flow. Here is where ten years of gains come from under each assumption.
| No growth | 2.1% a year | 3% a year | |
|---|---|---|---|
| Cash flow kept | $70,381 | $70,381 | $70,381 |
| Loan balance paid down by the rent | $28,375 | $28,375 | $28,375 |
| Gain in what the house is worth | $0 | $57,750 | $85,979 |
| Cash and equity gained | $98,756 | $156,506 | $184,735 |
These are example figures, not a forecast for any market.
The first two rows never move, because rents and the loan schedule do not care what the house is worth. Everything the growth rate touches sits in the third row. Going from 3% to nothing costs this house $85,979, nearly half of what the ten years produced.
What it does not do is break the deal. With no growth at all, the rent and the loan paydown still hand back $98,756 on $57,500 of cash. That is the test worth running: a rental that only clears your hurdle in the right-hand column is a bet on prices, and one that still clears it in the left-hand column is not. For the same point from the other direction, see whether a rental that loses money each month is ever worth buying.
Which rate should you type in?
Run two numbers rather than one.
- Zero. Not because prices will stay flat, but because it tells you what the property pays you for being a property. If the answer still works, growth becomes upside instead of a requirement.
- Something defensible for a second case. The latest national reading, or the figure for your part of the country: the same FHFA data carries the index for each of the nine census divisions alongside the national one.
What to avoid is the number you need. If you find yourself raising growth until the deal clears, the growth rate has stopped being an input and become the conclusion.
Appreciation also behaves differently from the other inputs in one way that matters. Rent arrives monthly and you can spend it. A gain in value is locked in the house until you sell or refinance, and selling takes 7% of the price in this example. The gain in the table is before that cost.
Does a higher growth rate ever flatter a bad deal?
Often, and it is easy to spot once you look for it. Growth compounds on the whole price, while cash flow works on the thin margin left after the mortgage. On a $250,000 house, 3% growth is $7,500 in year one against $5,043 of cash flow, so a seller’s projection leaning on price growth can bury a property that costs you money every month.
The two also come from different places. Your cash flow is a list of amounts you can check: a rent comparison, a tax bill, an insurance quote. Growth is a guess about a market. Treat the parts you can verify as the deal, and the rest as a maybe.
Rates do something similar to the monthly figure, and faster. See how interest rates change a rental’s numbers for that one.
What to do with this
Open the rental calculator, set growth to 0% and read the cash flow and the ten-year figures. Then set it to 2.1% and read them again. If the two answers lead to different decisions, the deal rests on the one input you cannot check, and that is worth knowing before you make an offer rather than after. To see how the same gains turn into a yearly rate of return, read what counts as a good IRR for a rental property.