INFLATION AND HOME PRICES
By Robin Shapiro
A client recently sold his home for over $2 million. He bought the house for $800k. He realized a large long term capital gain on the property even after accounting for the money he put into it. A different client bought his house for $200k and wants to sell it now because it is worth a million dollars. He invested money in it – but the capital gain is large, and he doesn’t want to pay tax on it. He hopes his accountant can figure out a palatable way to handle the tax ramifications. How did these houses appreciate? Remember when subways were 15 cents/ride (1953-1966), or 35 cents (1972-1975), or $1.50 (1995-2003)? Remember when the Daily News was three cents a 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 federal 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 number for their property – especially if that number is not crazy high. I don’t think my house will ever be worth $10 million, for example! Call me. Love, Robin.
