We all know home prices have appreciated a lot in the past generation in dollars terms, but what if they're measured in terms of shares in the S&P 500 or a global equity index. I sought out to determine this by pulling together the following data: 1) Median prices of SFH in Santa Clara County in Jan of each year from 1998. 2) Bay area rental index going back to 1998. 3) S&P 500 (i.e SPY ETF) adjusted closes (including dividends reinvested) Jan of each year from 1998. The same for a global equity index (60% USA, 40% international rebalanced each year). 4) CPI 5) 30 year fixed mortgage rates Using that data, I imagined a scenario where someone had a lot of stock in 1998 and paid an increasing rent price along the way (by selling stock at the current market price at the time rent is due) then each year along the chart, measured what it would cost to buy a home in SCC in the number of shares already paid to rent and the current number of shares to buy the a home outright. Interestingly enough, since 2003, the price of homes have been flat when measured by the total cost of the # of shares in the S&P 500 or the global equity (they're close but not too different). When measuring home prices PITI inflation adjusted, home prices are about 3X since 2011, but it was also flat from 2007 to 2020. preview.redd.it/.../khtwkduwe7qf1.png

Sure, it's great that my home has increased in value since I bought it, but it does me no good as other similar or better houses have also increased similarly. I've got a young family, my parents generation often came in with a starter home and were able to upgrade down the track. Seems like the only way we could upgrade is if my inlaws leave us their place and don't have to sell it to fund their aged care. I can sell my 3br semi detatched house that we got for 600k 5 years ago for 900k, but then we'll need 1.2mil to buy something nicer. So I'm going to be moving from a 570k mortgage to ... Uh, I'll have 330k after we've settled the mortgage, 50k stamp duty, 30ks to sell the old house, so that leaves me with a 950k mortgage. Instead of paying 2800 a month I'd be paying over 5000. This is not a win in my books. Booming house prices are great for investors with big portfolios, great for downsizers, but not for young home owners or young families. And real shit for those trying to get into the market.