Nominal vs Real prices

[Anonymous]

Why don't the real estate headlines mention real prices? They keep talking about nominal prices. As a result, buyers are not realizing that in real terms home prices are actually starting to decrease.

[Anonymous]

Oh look, a real estate agent.

[Anonymous]

What is the percentage of Americans who know the difference between nominal and real prices? Even better, among college grads how many know the difference? It is shockingly low.

A lot of actors have an incentive for you to be stuck in the nominal world lol.

[Anonymous]

When you look at your paycheck, do you recalculate it in the way you suggest?

[Anonymous]

Anonymous wrote:When you look at your paycheck, do you recalculate it in the way you suggest?

My dad is an economist and one time he told that whoever has an economics degree and is poor should either blame themselves or ask for a refund. For many years I never understood why my dad would look at an item for example that went up in price and my dad would just shrug and say that's a great deal. To me, the price went up so it's too expensive lol. He sees prices very differently.

[Anonymous]

Anonymous wrote:What is the percentage of Americans who know the difference between nominal and real prices? Even better, among college grads how many know the difference? It is shockingly low.

A lot of actors have an incentive for you to be stuck in the nominal world lol.

3% lol. It could have been higher if the other econ/business majors weren't sleeping or cheating in class lol.

[Anonymous]

We bought in DC about 15 years ago and there's no doubt that over the last five our place has declined in value. This year our tax assessment finally went down. I'd be bummed if we actually had to sell. But our interest rate is ridiculously low and we have a basement rental that rents easily and the rent covers 90 percent of the mortgage so I can't complain.

[Anonymous]

Anonymous wrote:We bought in DC about 15 years ago and there's no doubt that over the last five our place has declined in value. This year our tax assessment finally went down. I'd be bummed if we actually had to sell. But our interest rate is ridiculously low and we have a basement rental that rents easily and the rent covers 90 percent of the mortgage so I can't complain.

Well done.

[Anonymous]

Because people make decisions based on observations .

[Anonymous]

Real estate generally beats inflation but is still an awful investment.

$1 in 1980 would be about $4 today, when factoring in inflation.

That $1 invested in real estate in 1980 would have grown to $7 today, on average.

That $1 invested in the S&P 500 in 1980 would now be $100.

[Anonymous]

Real estate is a terrible investment compared to just throwing money into the SP500. People in more boom and bust areas like Florida and Texas get a huge down period occasionally and they have a much bigger property tax bill for the price. It’s more of a lifestyle choice and enjoying your space and wanting to modify it as you please

But yes. Prices are down in real terms now. It’s a good opportunity to buy from some fired federal employee, at real lowball prices too

[Anonymous]

Anonymous wrote:Real estate generally beats inflation but is still an awful investment.

$1 in 1980 would be about $4 today, when factoring in inflation.

That $1 invested in real estate in 1980 would have grown to $7 today, on average.

That $1 invested in the S&P 500 in 1980 would now be $100.

Most people buy a house with 80-90% mortgage.

In your scenario, if you bought the house with cash., then you have to add in the monthly housing cost you don't pay in rent. If you bought with a mortgage, your return should be calculated based on total equity over the down payment amount.

If you bought a house for $50,000 in 1980 and down paid $10,000, and it is worth $350,000 today, then your return is 3500% on $10,000, not 700% on $50,000. You didn't have $50,000 in 1980, you had $10,000.

That is median scenario, but depending on the real estate you bought, that $50,000 house from 1980 might be $1,000,000+, not $350,000.

[Anonymous]

Please. Youalso paid a mortgage for 30 years , real estate taxes that rose every year tracking that years value of your home and a new roof and much other maintenance and repairs. Oh and if you want to sell this “gem” to access your “investment returns” you will pay additional costs including capital gains taxes.

[Anonymous]

... and your point is?
If you put the $10,000 into the S&P in 1980, you'd pay cap gains tax on the returns, too.
Plus you'd still need a place to live (that is, unless you're still in your parents' basement).

Let's suppose that in 1980 you have kids. You'd like them to go to a good school and decide not to buy (b/c you put that $10K in the market). So you will need to rent a SFH in that good school district. Good luck finding a SFH with a rent lower than a mortgage... AND at the end of the kids' elementary school, you won't have invested all of that rental $$ you paid your landlord. BUT ... guess who would have invested it? Your landlord! So nice of you to have made someone else rich.

So, what's your point?

[Anonymous]

Not everything is strictly about money. Buying a house right now may or may not be as advantageous as putting the downpayment in a diversified portfolio. But we just bought our fist house for the sense of stability and rootedness to a community (and its community pool, traditions, multi-generational neighbors etc.) that my DH and I craved. Others might feel as secure renting, and well, great for them! I don't know why this difference is a source of consternation on this forum. I am happy with my choices and to the PP who started his post with "Please," I hope that you become satisfied with your choices too so that you don't have to bring as much bitterness to your posts. Be well.