It's Housing Inflation. Not Housing Appreciation

It’s Inflation. Not Appreciation. 

Question for you… How do you talk about prices and them going up? I mean, let’s take my Diet Coke for example. The cost of this diet coke has gone up by at least 50 cents this year. So if you and I were talking about prices, then would you say to me that the diet coke has appreciated 50 cents this year? 

Probably not. That would kind of be dumb. Then why is it that any price gains that we talk about when it comes to Real Estate are always appreciation? Wouldn’t it be fair to say that price gains for real estate are inflation plus appreciation? 

But real quick. My name is Jeff Chubb and I am a retired investment banker turned real estate agent that has sold more than a 1,000 homes and am one of the top Realtors in Massachusetts. If you have real estate questions, then I am here to help. 

I think this is the major reason that people are constantly saying there is a bubble in real estate. They see the prices going up and up and up. I mean it’s not just real estate it’s all around us. 

Check this out.

It’s a bar graph for prices for Consumer Goods and Services in the United States. 

So should we say that the cost of Hospital Services have appreciated by 99.8%? Or how about the cost of college appreciating 64.4%? I mean both are investments, right? One is an investment in our health with the other being an investment in our knowledge and thereby our future earning potential. 

No, that would be pretty dumb. 

But let’s go back to this graph. The yellow bar is the CPI or the Consumer Price Index. Since 2008, the CPI or essentially what we call inflation has increased by 42.2%. 

In other words the dollar that you had in your hand in 2008 is worth 42.2% less than when in your hand today. 

But did you notice the bar that was to the left of the CPI chart? It was the cost of housing. The cost of housing has gone up by 48.3%. 

When you subtract the devaluation of the dollar, then that means the cost of housing has only outpaced the broader market by 6.1%. You could even make the case that this is the true amount of appreciation that the housing market has seen since 2008. 

Again, there is little doubt that housing prices have gone up by a lot. But so have the costs of our weekly groceries and pretty much every other essential spending that we have. 

I challenge you to look at the cost of housing and compare the gains to costs of other essential goods and services. There is little doubt that us as a consumer is getting screwed. But that doesn’t mean that prices are going to go down or that this is an inflationary bubble. 

From 2002 to 2007, CPI rose by 14.39%. In the same five years, home prices went up by 29.17%. In other words, home prices outpace inflation by 14.78% or by 2.96% per year. 

This is compared to what we have now. We have an outpace of inflation of 6.1%, but over a 14 year period. So that means since 2009, home prices have outpaced inflation by .43% per year. That hardly seems like a bubble to me. 

Why do I spend so much time on this? It’s not because I need to prove that I am right. It’s because so many people are getting so much bad advice. They are sitting on the sidelines trying to time the market perfectly. And while they do that, the opportunity continues to bleaker and bleaker. 

I can remember over the years speaking to so many people who said they were going to wait until home prices go down. In 2018, the average price for a house in the United States was $261,600. That was $348,000 at the end of 2022. 

That’s painful. It’s a ton of money. And at the end of the day, I think the real issue doesn’t come down to prices, but purchasing power. As the value of the dollar depreciates, we as consumers get less and less. So therefore we need to earn more. Interested in taking a look at all of the 285 Columbus Avenue Condos For Sale

Quick question. From January of 2020 to October of 2023, have your earnings increased by 34%? Well if not, then that means the purchasing power from your labor hasn’t kept pace with higher costs. 

And that is the issue. Home ownership is becoming unaffordable to more and more Americans. The American Dream is dying. Homeownership is becoming a luxury that is only afforded to the well off. And it’s going to get worse and worse. 

So who is to blame? And that is what we are going to dive into on one of my next videos.

Again, my name is Jeff Chubb with the Chubb Homes Team. I hope you found this video helpful. Whether you are looking to buy a home in Massachusetts or anywhere else in the country, then it would be a true pleasure to help. 

Yes, I personally can only help people in Massachusetts, but I do have expert agents that I work with all over the country. And it would be a true pleasure to make an introduction for you… At no cost to you obviously! 

If you have questions, or are interested in buying a new house, then give me a call, shoot me an email or visit us at You can also find my information in the description below. 

Until next time.


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