Gary Bauer who used to prepare the local Denver housing reports for decades last week put together a comparison report of Denver real estate from 1990 through 2015 and compared it to gold and stocks and this story appeared on www.DenverRealEstateWatch.com
Are you ready for a treasure trove of stats? Here they are-
- Average Denver home prices (all types of residential housing) have increased by 286% since 1990 from $94,134 at the end of 1990 to $363,143 at the end of 2015!!!
- And it’s not all because homes have gotten larger since 1990. How do we know? Case-Shiller which uses paired home sales data says our home prices have increased by 262% in these last 25 years. Thus, 92% of the price gains is an increase in price per square foot basically.
- So, how much of our price increase is from inflation? Since 1990 inflation as measured by the Consumer Price Index has risen by 81.3%. Thus, an average price home in 1990 should be worth $170,706 in today’s dollars. Instead, our average home price has more than doubled the inflation rate.
- How does Denver RE compare to gold? Since 1990 gold prices are up just 176% or about double the rate of inflation, which makes sense as gold has often been touted as a great hedge against inflation.
- How does Denver RE compare to the stock market? Since 1990 the S&P 500 has risen 525% and if all dividends were reinvested, the total return over 25 years was 938%.
- So, it appears the stock market is a better investment, but is it? Remember about 75% of home buyers in our market get a mortgage to buy a home. Let’s assume each buyer put on average 20% down. Thus, their actual investment in the asset known as real estate is only 20% of the price. Now, multiply 286% x 5 and your return on Denver real estate has been 1,430%.
- Plus you can live in a home and you and everyone else needs a home. Plus, we get to enjoy that asset while we own whether by living in it or by getting monthly rent checks.
- We don’t need to own stock and stock can’t house you and it’s really difficult to enjoy a stock, unless you still have an old fashioned stock certificate that you make a paper airplane out of.