Inflation and Home Prices

By Robin Shapiro

Not too long ago, a client sold his home for over $2 million. He bought the house for $800k. He realized a large long term capital gain. A good friend bought her house for $200k and wants to sell it now because it is worth a million dollars. The capital gain is large, and she doesn’t want to pay tax on it. She hopes her accountant can figure out a palatable way to handle the tax ramifications. She’s contemplating the purchase of a newer bigger house which is one way to reduce or eliminate the tax bite.  How did these houses appreciate? Remember when subways were 15 cents a ride (1953-1966), or 35 cents (1972-1975), or $1.50 (1995-2003)?  Remember when the Daily News was 3 cents per day (in the 1950s)?

Real estate reacts to inflation and can be a good way to participate in it. Currently, the Federal Reserve has a policy of trying to reduce inflation, which may prevent prices from increasing in the near term, or even decline a bit. REGARDLESS of Fed policy, which can change, the big picture is that prices tend to go up over time. For patient people, the longer they wait, the more likely they will reach the DREAM valuation for their property. Call me. Love, Robin.