Quote:
Originally Posted by Woody
I think the chart represents the average of the asset class as a whole. If you cherry pick one example of a piece of real estate that you know had a higher return, there are also examples of stocks that have had much higher returns than indicated on the chart.
A few years back I had done some research on long terms returns for stocks vs. real estate. The data that I found at that time indicated real estate and stocks have had pretty similar returns over the long term, with real estate having a slight edge. The figures I remember were close to 9% to 10% per year.
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My point is the chart is inaccurate. The median home price in America is $212,000.
Now, if you calculate $100 over 80 years with compound interest at 9%. It's right at $100,000.
Where I think they meant to go with the chart is that same $100 invested in real estate wouldn't have grown at the same rate. Not even close.
In my opinion the median home price in 1928 vs. today would be a better example. Then you have to factor in costs over the years and it gets tricky. Is it an investment covering it's own cost for the most part or primary residence. etc...
The average home price in 1930 was $7800.
With the $7,800 and $212,000 in mind, there is no doubt the $100 in the stock market is superior.
Just for fun let's factor a free and clear property after say 30 years that generates income for 50 years. At only $500 a month for rent over 50 years, that's $300,000. Then you add the appreciation of $204,200 for a total of $504,200.
To put the nail in the coffin, if you would've invested the same $7,800 in the stock market in 1928, you would have over $7,000,000 today.
Case closed....
