Enough with the stock market! How about a change of scenery - CPI!!! Known as inflation in some circles. The website, www.shadowstats.com, is obviously conspiracy theory-ish, but what fun would it be without?? Let me get to the point. In that website, the author is saying that CPI/inflation is really more around 9% per year. That leads to the following I got in an email:
"Wish you had a way to predict what homes will cost in the future?
- Take the inflation rate (for example 9 percent) then divide into 72 [72/9 = 8]. This means at the current rate of inflation prices will double in 8 years. Let’s say you want to know an approximate value of a property if you held it for 16 years instead…the entire amount would double again. For example, if you purchased a short sale property for 100k then it could double to 200k in 8 years and reach 400k in 16 years. Of course these are estimates since some years go up much faster than others…"
So, every 8 years, huh? There are lots of houses built 100 years ago. I happened to find a cost of a house in 1896:
Granted, it is from Quebec, but it will have to do unless someone can find a more accurate price for houses from the 1900’s. Anyways, that house cost $2,817.35.
With 112 years to work with, and doubling every 8 years, that’s 14 doublings until the year 2008:
$180,310.40 ← this is in 1944
If anybody here knows how to sell a house from the 1900’s for $46 million, please, I need to know your sales secrets because I know of hundreds of them that are currently being offered for less than $100,000.
Anyways, this exercise was kinda for my own self-awareness. I come across graph after graph being sales pitched by numerous people about the exponential qualities of house price increases over time. I deduced from common logic quite a while ago that house prices don’t continue to increase forever. I had just never put it onto “paper”. Enjoy!