Figures Don't Lie

Many years ago, my Uncle Wes was listening to a political commentary on the evening news. About halfway through the piece he got up, turned the TV off and told me: "Figures don't lie but liars sure can figure" This Blog is dedicated to setting things right about a few of the numbers tossed around in today's political discussions.

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Location: Bloomington, Minnesota, United States

How old am I? Well, for much of my career, I had a secretary. And, my best secretary could take shorthand.

Wednesday, August 31, 2011

Your Home Has Not Increased in Value

I frequently argue with folks who say, "My home has doubled (tripled, quadrupled - you pick it!) since I bought it back in xxxx."

I always ask, "How many bedrooms does it have?" They might say, "four." Then, I say, "And if you sold your home today, you could buy a how-many bedroom home in the same neighborhood?"

Of course, the answer is the same as they now have. Their home has not increased in value. The dollar has decreased in value. And don't forget that they would lose 6% to the Real Estate industry in the process!

O sure, there have been some periods of time when lots of people believed they were experiencing an increase in value. This happened briefly in the 1980s and to an extreme in the early 2000s. But the market settled down both times.

There was a recent "Chart of the Day" that illustrates the return to normalcy:

Ah, but you may ask, "what if I had bought and held." My 1970s home would be worth a lot more!

Nope. That just reflects the increase in home size from around 1000 square feet in 1900 to 1500 square feet in the mid-1970s to over 2000 square feet in the 2000s.

You could probably have made some money in the 2000's swapping Treasuries for homes and back if your timing was good. Hence, TV programs like "Flip This House." But your timing had better be pretty good. Suggestion if you visit the Wikipedia entry for Flip This House - search for the word "fraud."