So the owner actually lost purchasing power in owning this house for 15 years. Minus commission and closing costs, the proceeds were around $237,000, which is about $33,000 less than the inflation-adjusted break-even point of $270,000.
Yes, there is the mortgage deduction and tax breaks to factor in, but considered strictly as an investment, the nominal and real gains in real estate still matter.
Put another way: a house purchased in 1996 for $100,000 has to be worth $142,000 today just to keep up with inflation. Factoring in transactions costs, then the house would have to be sold for roughly $152,000 for the owner to extract $142,000--the sum needed to simply maintain purchasing power.
In other words, a house that rose 50% over the past 15 years has simply kept pace with inflation. The nominal "gain" is utterly illusory.
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