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My House Is Worth ... Not Quite As Much As That
I occasionally watch HGTV's My House is Worth What?, which, for those of you who haven't seen it, is a show where the host and a local real estate agent go through someone's house and appraise it, then at the end of the segment they compare it to the price the homeowner paid and how much they've put into it and tell them how much the house has appreciated (or not!) over the years.
What they don't do, however, is account for inflation. So some of their most amazing-sounding appreciations are worth nowhere near that much.*
Take, for example, the show I just watched (amounts approximate, as I don't remember them exactly). A couple bought their home in 1982 for $87,000. It was a serious fixer-upper and over the years they poured something over $107,000 into it. The appraisal came in at $567,000 and change, for an appreciation in the neighborhood of $364,000. (My numbers don't add up because I forgot the exact amounts for everything, but this is in the ballpark.)
Only ... in 1982, $1 would buy what $2.02 would buy in 2008 (the latest date the Inflation Calculater has in it). So ... this means that they actually paid the equivalent of roughly $190,000 in today's dollars. If you do the calculations again, assuming that the $107K+ they put into it is actually in 2008 dollars, because I have no idea when they did the renovations, then the house only appreciated by $270,000. Still a chunk of change, but only two-thirdsish of the appreciation quoted.
* And I'm not even factoring in that these prices are what the real estate agent would put the house on the market for, not how much it would actually sell for. That would be a huge headache to figure out.
What they don't do, however, is account for inflation. So some of their most amazing-sounding appreciations are worth nowhere near that much.*
Take, for example, the show I just watched (amounts approximate, as I don't remember them exactly). A couple bought their home in 1982 for $87,000. It was a serious fixer-upper and over the years they poured something over $107,000 into it. The appraisal came in at $567,000 and change, for an appreciation in the neighborhood of $364,000. (My numbers don't add up because I forgot the exact amounts for everything, but this is in the ballpark.)
Only ... in 1982, $1 would buy what $2.02 would buy in 2008 (the latest date the Inflation Calculater has in it). So ... this means that they actually paid the equivalent of roughly $190,000 in today's dollars. If you do the calculations again, assuming that the $107K+ they put into it is actually in 2008 dollars, because I have no idea when they did the renovations, then the house only appreciated by $270,000. Still a chunk of change, but only two-thirdsish of the appreciation quoted.
* And I'm not even factoring in that these prices are what the real estate agent would put the house on the market for, not how much it would actually sell for. That would be a huge headache to figure out.
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