The above chart estimates the market value of today’s median-priced San Francisco, California metropolitan area house from 1987 until present. The red line represents inflation-adjusted house prices. The blue line represents nominal house prices.
Earlier this week, Burbed reader Pralay linked to this chart. Sweet!
It just goes to show that any minute now, the graph is going to shoot up again!
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With 11% annual return in stocks, how many years will it take for you to catch up to the 300% return yielded by Bay Area real estate in the past 10 years?
Your 3.7% figure for real estate includes places like Iowa, Nebraska, North/South Dakota, Montana, etc. We’re not talking about those places. They don’t have Silicon Valley, and they don’t have our weather. If you focus on the Bay Area for a moment, you’ll find that on the average Bay Area properties double in price every 10 years, without exception. It will surely double again, and it doesn’t matter what happens in the next 2-5 years. So far, you have not been able to explain what would be the drivers for lower prices; you’re just making a claim based on your own guess.
One other comment about rents. Over time, rents will increase. However, if you have a fixed rate mortgage, your housing expense will not go up with inflation. Most people I know who bought say 10 years ago, are paying less for mortgage than what it would take to rent the house. In other words, the cost advantage of renting is only short term. Renting is like leasing a car. At the end of the day, you get nothing.
Agree? Disagree? Does this only apply to The Real Bay Area?
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