Chart of the Week: How good of an investment is real estate?

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Oct 17, 2018
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Investing, Question of the Day, Chart of the Week, Mortgages, Research

Hat tip to A Wealth of Common Sense blog for this awesome data distilled from Case-Shiller/FRED index of home prices:

Notes:

  • Positive is number of years that home prices rose in the period 1987-2018
  • Negative is the number of years that home prices declined in period 1987-2018
  • Biggest gain is the largest gain in home prices on a year-over-year basis.
  • Biggest loss is the largest loss in home prices on a year-over-year basis. 
  • Annual Gains is the average annual gain in home prices over this period. 

Questions:

  • Overall, if you look at the last line in the table (lower right), what were the average annual gain in home prices for all markets over this time period of 1987-2018? Does that seem like a good return compared to the stock market? savings accounts? 
  • Agree or disagree with this statement. Cities such as San Francisco, Denver and Portland saw housing price gains greater than the overall U.S. market?
  • Why do you think that large cities tended to have larger annual increases in home prices compared to suburban or rural markets? 
  • Your friend says buying a home is always a great investment in that it doesn't rise or fall like the stock market. Agree or disagree with him/her based on the data provided above. 

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Looking for ways to bring charts/graphs into your classroom? Check out NGPF Data Crunches! 

 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.