Here’s a follow up to yesterday’s post, “↑90%   ↓60%   ↑40%   →0%”.

If you think, “John’s crazy! I paid $200,000 for my house in 2000 and it’s worth $280,000 today. It’s appreciated a helluva lot!,” I’ve got bad news for you.

Total inflation from 2000 to today has been 40%.

$200,000 in 2000 is worth $280,000 in 2015, after inflation.

This fits nicely with super long terms studies from economists Case and Shiller themselves that found real U.S. home prices have generally only appreciated 0.4% or 0.7% a year depending on how they cut the data. Ten years ago their studies seemed completely silly, that times had changed, this time was different. Today, their studies don’t seem so out of touch.

It’s been a wild ride but real (inflation-adjusted) home prices in metro Phoenix are where they were back in 2001.

Inflation-Adjusted Case-Shiller Phoenix Red Line

And if you go back 25 years to January 1989 (the oldest data Case-Shiller has for Phoenix), real Phoenix home prices have only increased a grand total of 10%, or 0.4% per year on average.

[To be fair, I should point out that 1989 was probably the top of the “Savings and Loan” real estate boom of the late 1980’s. That boom was mainly in commercial real estate but it did have an impact on residential real estate prices.]

Your comments are very welcome!