American Home Appreciation
American Home Appreciation: Bubble Ground Zero
byDan Ferris
“I’d rather take my money out of this house and put it in a pile of gold coins, a few cheap stocks, maybe some nice arbitrage situations…and an apartment in the city.”
My wife was looking through the real estate section of the local paper last night.She reckons that our house has appreciated somewhere between 33% and as much as 50%(!) over the past year or so.Steve Sjuggerud told me that our town is in the top ten in the United States for new home price appreciation.It’s Bubble Town, USA, I guess some would say.
Funny, though…I still cut the grass, and pay the bills and fetch the mail down at the end of the road and my wife still has “big plans” for spending more money on our ever-changing, ever-growing landscaping.
American Home Appreciation: Has the housing gone up, or has the currency gone down?
But…well…nothing inside our house has changed to reflect this new “wealth.”I’m not richer in any meaningful way as a result of this price appreciation of homes in my area.And if I sold my house now, I’d only be able to put all this new wealth into something just about like I’m living in now, no worse, but no bigger or better.So…has the housing gone up, or has the currency gone down?It feels a lot more like the latter here at Bubble Ground Zero.
Experience plus my research into real estate for our new Real Estate Shareholder letter has taught me that a house isn’t really much of an investment, contrary to what everybody will tell you.It doesn’t pay me a penny in rent or interest or income of any kind.I can’t spend it without going into more debt.With investments, you’re supposed to earn interest, not pay it!And if I sell my house, I have a choice to make: either use the proceeds for more real estate, or pay a big capital gains tax.
American Home Appreciation: Not much of an Investment
My only return is the benefit of living in it.That’s it.It may be a nice place to live, it might be worth a lot more when we eventually sell it, and there may even be some imputed rent value that I’m failing to take account of (it’s easy to do that; a dead man could do it), but it doesn’t sound like much of an investment to me.
I’d rather take my money out of this house and put it in a pile of gold coins, a few cheap stocks, maybe some nice arbitrage situations…and an apartment in the city.
But if I tried to do that, my wife would never hear of it.She wants to have a house and a yard and an arbor and a fish pond…
So, for now at least, I’m stuck inside the bubble.
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