Get Rich Education 501: Home Prices Aren't Really Up. Here's Why.
In this episode of the Get Rich Education podcast, host Keith Weinhold explores the current state of home pricing and the housing market.
He examines whether homes are overpriced or underpriced by comparing them to historical values, gold, and bitcoin, and discusses the influence of inflation and financing on affordability.
The episode features insights from Danielle Hale, chief economist at realtor.com, on the challenges for young homebuyers, housing supply issues, and mortgage rate effects.
The conversation also covers the build-to-rent trend, investment strategies, and the importance of increasing housing construction.
Weinhold concludes by offering free coaching for building real estate portfolios.
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Complete episode transcript:
Welcome to GRE! I’m your host, Keith Weinhold. Home Prices Aren’t Really Up! Brace yourself. A mic drop moment on real estate costs is coming.
It’s an unmasking - a reality check on property prices. Are homes actually still priced too LOW today? How could that POSSIBLY be true at all? On Get Rich Education.
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Welcome to GRE! From Belgrade, Serbia to Belleville, Illinois and across 188 nations worldwide. I’m Keith Weinhold and you’re listening to Episode 501 of Get Rich Education.
We’ll get to “Are homes overpriced or underpriced today?” shortly.
But understand this…
I successfully acquired something at a young age. And you can too. That thing that I successfully got ahold of was not millions of dollars… because I came from average means.
What I intentionally and successfully acquired was millions of dollars in debt.
Yes, obtaining millions in debt from a young age… is what led to me quitting my day job while I was young enough to enjoy it.
You, the longtime listener, COMPLETELY understand and appreciate what I just said. If you’re a newer listener, that sounds unusual or even irresponsible. Well, come along for the ride.
Also, a layperson - or a newer listener - would respond with, “No one talks that way, thinks that way, or does that.” - taking out millions in debt and calling THAT aspirational.
But using that debt as leverage is how you ethically take funds from the big banks - take Chase Bank’s money, take Bank of America’s money, take Wells Fargo’s money - learn how to use it, be a responsible steward of the funds, provide good housing for people and prosper.
That means you get the return on both your down payment - and the entire amount that you borrowed from those banks. That all goes to you. And both your tenants and inflation pay the debt back - not you.
Look, I know one person. I personally know a guy - Greg. Greg makes $80K a year from his day job. Good guy, married guy, one kid.
And his NW increased by $2M just in the COVID run-up. He has a modest salary but his NW is up $2M just since 2020.
First of all, do you think that any of Greg’s co-workers experienced that effect? No, he’s really going down my path. You soon get unrelatable to co-workers and even some of your peers.
Well, what makes it possible for a good family guy - or anybody - to go from a middling salary to obtaining life-changing wealth?
It takes leverage. He borrowed for bank loans. That way, he could acquire 5x as much property than if he paid all cash for his rental properties.
That way, he had 5x as MANY properties… and properties all appreciate at the same rate regardless of how much equity you have in them.
See, if he had paid all cash, he’d only have a $400K capital gain. Not bad, but $2M is life-changing. Thanks to leverage.
Everyday people obtain life-changing wealth this way. It’s so substantial… that it won’t only affect Greg’s life. If he continues on this way, it’ll take care of his children, grandchildren, and great grandchildren.
And you know, maybe this is why, one of the most recurrent guests we’ve had here in the history of this GRE, Ken McElroy, he says:
“The best investment in RE is the one that appreciates the most, not the one that cash flows the most.” That’s Ken McElroy. And now you can see why he says that.
Leveraged appreciation creates wealth the fastest. Cash flow is important and it CAN boost wealth but that happens more slowly. Principal paydown doesn’t create it - it enhances it… and it’s the same with tax benefits.
Deferring your tax on a 1031 means that you can re-leverage a greater amount.
Low interest rates also don’t create wealth. In fact, I bought my first ever income property with a 6⅜% mortgage rate and my second income property with a 7⅝% rate - that second one had interest-only payments.
But I borrowed the maximum amount that I could without OVERleveraging. Overleverage means losing control of the mortgage and operating expenses.
The lesson here is… get the leverage.
And… case in point. Here we go…
Speaking of appreciation, the LATEST Case-Shiller Home Price Index figure came in. The US currently has… 6.4% YOY home price appreciation. Now, their index is only based on 20 cities but that gives you a pretty good idea.
In fact, that is the fastest rate of increase since 2022.
Now, if you’ve let equity build up in your properties to the point that they’re half paid off, you had 2x leverage, meaning the 6.4% appreciation just gave you a 12.8% leveraged return on your skin in the game.
And, of course, if you leveraged with a 20% down payment a year ago, that 6.4% means that you just got a 32% return.
And as we know, these returns I just told you about are from one of just one of FIVE ways that you’re expected to be paid simultaneously.
But yeah, a 6.4% higher is merely a DOLLAR-DENOMINATED price. That’s what that is. Why do I say that carefully?
Well, there are a few reasons that home prices are 6.4% higher - inflation from dollar printing could be why, the value - not price - but some properties have a greater VALUE, distinctly separate from inflation.
What’s the distinction there - how does this happen? What’s one difference between an INFLATED price and a greater value?
Well, say that a local economy is hot because there are more high-paying jobs there now than there were last year - say an influx of medical jobs or AI jobs or chipmaking jobs.
Well, even absent inflation, a property that now has PROXIMITY to better-paying jobs - that’s now a property that’s more desirable.
Someone is more willing to PAY MORE FOR - and simply CAN pay more for. Again - that phenomenon is ABSENT inflation.
What’s another reason that home prices rise - and rose 6.4% YOY in this case?
If better PHYSICAL AMENITIES are in new homes than there used to be - say bigger garages or new communities with pickleball courts, well, people are more willing to pay more for that.
To review, there are three reasons that home prices go higher: inflation, appreciation from value creation - like how the same home is now located closer to more high-paying jobs, and thirdly, better built-in amenities.
All three of those increase dollar-denominated price or value. They all increase the nominal price.
Now, let’s pivot into the fact that “Home Prices Aren’t Really Up”.
I’ve covered this a little before, but I’m going to go deeper today in giving you the most comprehensive look at home prices today - compared to the past - perhaps than you’ve ever had in your life.
Some might say, “C’mon. How can this be? Homes cost, perhaps 40% more than they did just four years ago.”
Well, I’ve got a mic… drop… moment… coming.
- Home Prices Aren’t Really Up.
We need a good measuring stick to see what home prices are doing. So we’ve got to stop pricing homes in dollars for a minute. It's a poor long-term value measure.
Ludicrous inflation means the dollar has lost over 25% of its value just since 2020, and 97% of its value since 1920.
Let’s use a commodity and money that has been valued for five millennia - and its physical properties have not changed one bit in allll that time, and its valued across continents and cultures - that’s 50 centuries of value! That’s gold.
We’ll get to a more modern measure soon. But first, gold is the best one.
Now, I don’t know who to credit, but for a while, there was an image floating around out there that GRE got ahold of.
It showed that 10 kilos of gold would buy you an average home back in 1920… and also, that 10 kilos of gold would still buy you an average home today… total… mic… drop… moment. Wow! Is there any better evidence that home prices are NOT up - but higher prices reflect that the dollar is down?
Actually, yes, there is a little better evidence. We ran the numbers here and learned that - it’s even more astounding than that!
You run how many dollars per ounce gold is worth, that 35ish ounces are in a kilo and you look at home prices then and now and we discovered that - it’s even more of a jaw-dropper…
… because in 1920 - which I’ll just call a century ago - you could buy an average home for 8 kilos of gold and today, you can buy an average home for just 6 kilos of gold.
So if you want to know how much home prices have changed in the last century, they are down 25%.
They’re 25% cheaper today in terms of gold - clearly a more stable value indicator than horrendously diluted dollars are.
And also, GRE made a new image that shows this - 8 kilos for an average home a century ago, 6 today. I sent you that image in our newsletter about ten days ago and that image got shared a LOT of times.
Your first reaction to this whole thing could be: "Wow! That's wild. The dollar really is sooo diluted."
Alright. What about home prices in terms of a popular, nascent asset that only arrived fifteen years ago, bitcoin?
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2016: Average home cost $288K, or 664 bitcoins.
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2020: Average home cost $329K, or 45 bitcoins.
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2024: Average home cost $435K, or 7 bitcoins.
So, eight years ago, a home cost 664 bitcoins and today it costs 7.
That means that home prices are down 25% in terms of gold in the last century.
But they’re down 99% in bitcoin over just the last 8 years.
And the dropped mic keeps reverberating through the stadium.
Today's homes are cheaper in gold and drastically cheaper in bitcoin.
See, it takes real world resources and proof of work to create real estate, gold, and bitcoin. None of these things are required to produce a dollar - none of them. That's why its value is approaching zero.
But let’s go deeper. You need more answers - you are part of a really intelligent audience.
Because you might be thinking: "Wait a second. Some other things have changed too." For real people - everyday people - aren't home prices actually more out of reach than this?
That's because since 1920, home prices have risen faster than incomes. That puts them OUT OF REACH for more people.
Something else has changed. A home's lot size is smaller today too - the land that comes with the property has a smaller area.
Let’s understand too - homes also use some cheaper materials today. For example, heavy, milled raw wood doors - the interior doors - of yesteryear have given way to molded particle board today.
This is beginning to build the case - evidence - that homes SHOULD be cheaper than they are today.
Let’s keep going, because there’s more to consider.
Mortgage rates themselves - just rates in isolation - they don't put homes out of reach at all. The long-term average is 7.7%, per Freddie Mac, on the 30-year FRM. That average goes back to 1971, when they first began tracking them.
Oppositely, you can make the case that U.S. homes should cost even more than they do today.
In many advanced nations, homes are way more pricey. Even next door in Canada, they cost about 20% more than U.S. homes. Canadian salaries are lower than US salaries too - yet their home prices are markedly higher.
On some levels, you're getting more "home" today in the US.
A 1920 home would feel savagely uninhabitable to you if you tried to live in one now.
Here’s what I mean…
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In 1920: 1% of homes had electricity and full plumbing.
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Today: 99% of homes have electricity and full plumbing.
What I mean then, by savagely uninhabitable, is enjoy walking to the outhouse in the middle of the night when it's 35 degrees.
Then there's size:
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1920: The average home had 242 sf per person.
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Today: The average home has 721 sf per person.
Because today, family sizes are smaller and homes are way larger too.
Today's amenities would be unthinkable in 1920—walk-in closets, roofs with R38 insulation, double-paned thermal windows, smart thermostats, voice-controlled lighting, quartz countertops, and Kitchen Aid appliances. Maybe even a security system. They’re all things that homes have today.
Gosh, even the fact that you have a garage - a HEATED garage even, finished basement, air conditioner and modern washer-dryer would leave 1920 homeowners dumbstruck with their mouth agape—maybe even flabbergasted. Those old folks from yesteryear wouldn’t believe all that you get with a home today.
Yet that 1920 home would have cost you more in gold, than today’s more sizable homes with all their plush amenities.
Now, when it comes to - though home prices aren’t up, are they more “out of reach” for the average American?” Over the past five years, they ARE - because home prices have now risen faster than incomes over THAT stretch.
But another BIG reason that homes are SUBSTANTIALLY more affordable today than they were in 1920 is… financing terms.
Today, you can make a down payment for between 3% and 20% on a home. Do you know what loan terms were like in 1920? You had to make a 50% down payment and then had to pay off your mortgage in 5 years.
Can you IMAGINE if that were the case today? How many people could put 50% down on a home today and then pay off the balance within 5 years. Virtually nobody. That’s why homes are more within one’s grasp today.
Overall, you can see that there are a lot of countervailing factors here… tempering that it took 8 kilos of gold to buy a home a century ago, and it just takes 6 kilos today.
The bottom line here is that, long-term, real home prices aren't up. Dollars are down because they've been printed like crazy.
From today, nominal home prices could keep rising for years.
Dustin on social had a funny comment about this - “How many baconators from Wendy’s would it take to buy a home today?” Ha!
I don’t know. I guess that’s a hamburger - I don’t go to Wendy’s. Maybe then, a home costs 60,000 baconators today.
Coming up straight ahead - what will happen first - a $750K median-price home, $100K bitcoin, or $5K gold.
Also, what’s perhaps the biggest trend in real estate investing that not enough people are talking about - and how you can make money from it… and more… all next - I’m KW. You’re listening to Get Rich Education.
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Welcome back, to Get Rich Education. I’m your host, Keith Weinhold.
On our latest GRE Social Media Poll, we ran this question.
What will happen first?
The median home value hits $750K.
Bitcoin hits a $100K price. Or…
Gold hits $5K.
I’ll give you the result, but what do you think? Again, which one of these three things will happen first?
The median home value hits $750K.
Bitcoin to $100K. Or…
Gold hits $5K.
The results across both LI and IG were pretty similar - sometimes you get differences there, as LI is a more professional audience.
One voter in the poll also commented - it’s syndication attorney Mauricio Rauld, who we’ve had here on the show before.
Mauricio said: I think assuming Bitcoin doesn't collapse, it probably makes a run to $100K in the next few years (who knows, could be next few months). But with the median home, at 10% a year, it would take 6 years to hit $750K so that is a decade away. That’s his thought - sounds reasonable.
The poll RESULT is:
Bitcoin will hit $100K first. That was most likely, with 57% of you answering that. That makes sense since its volatile and close to striking distance.
The median home value will hit $750K finished 2nd. 26% of you said that.
And gold up to a $5K price got just 17% of the vote. That makes sense since gold prices would have to about double from here.
You can always join along in the conversation and polls. We are really easy to find - because on virtually every social platform - Facebook, Instagram, LI, YouTube - we ARE: “Get Rich Education”.
Over on the Get Rich Education YouTube Channel, I recently covered how the Fed is overseeing a “Tug of War” between inflation and a recession. They don’t want the game to end. The Fed is trying to keep the game going.
They don’t want participants on either side falling into a pit in the middle of the Tug of War game between inflation and a recession. They don’t want either side to win. If one side wins, the Fed loses.
This “Tug of War” game is really a great way to understand how the Fed works, how they control your money, and what their motivations are. A video about that is on our YouTube channel - where you get the visual of the Tug of War game between inflation and a recession.
That’s just one example of how that content is often different from what you’re hearing now. Get more… on our YouTube Channel… called “Get Rich Education”.
The homeownership rate just fell again a little, quarter-over-quarter, increasing the number of renters and rental demand, which I expect will only continue. From CNBC, Realtor.com’s Chief Economist Danielle Hale tells us more. Let’s listen in. It’s about why the housing market is pretty dire for young Americans, then I’ll be right back with some key commentary on this.
Yeah, there in Economist Danielle Hale’s interview - if mortgage rates go higher, inventory pulls back and we tend to see modest HPA. Most agree that if mortgage rates go lower, we’ll see RAPID HPA.
She also just keeps exposing what we all know. “We need to build more housing”.
A brand-new home constructed with a renter in mind, sold to an investor, is known as build-to-rent housing. You’ll see it abbreviated BTR. It's usually single-family.
Some abbreviate it B2R. These must be the same people that say H2O instead of water.
It's become massively popular.
Despite an overall housing shortage, last year, a record 27,495 BTR homes were completed.
That's up 75% from the prior year and up an astounding 307% since pre-pandemic deliveries back in 2019.
So what's driving the build-to-rent trend?
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Locked into low mortgage rates, existing homeowners won't sell. So, instead, new inventory must be constructed.
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More overall housing demand than supply.
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Wannabe first-time homebuyers cannot afford homes today. Renting a BTR is next best. National BTR occupancy is over 96%.
BTR operates similarly to apartment buildings under property management, yet offer a single-family living experience.
Some of these communities have: leasing offices, pools, and fitness centers.
The homes themselves often have: luxurious modern finishes, garages, and fenced backyards.
What's in it for investors? How do you make money with BTRs?
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5% mortgage rates* (I’ll get back to that in a minute)
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A long-term ownership focus, generating revenue over time rather than immediately
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Tenants have a house-like feel. Expect 3+ years avg. tenancy duration.
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Mgmt. fees are low because all houses are the same and all in the same area too
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BTR purchase prices are HIGHER than resale property. You will pay more.
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Expect better appreciation than resale property
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The rent range is often $1,500 to $3,500
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You can expect low maintenance. It's new.
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Builder home warranty
So there are a ton of factors that give build-to-rent investor appeal.
Really, 5% mortgage rates? Yes. Here at GRE, we can introduce you to some BTR homebuilders that will buy down your rate for you. One is lowering it to 4.75%.
I encourage you to get that incentive now, because when mortgage rates fall substantially, I don’t expect these national and regional homebuilders to keep giving you the rate buydown.
Sorry J-Pow. This kinda makes your next Fed rate decision… seem pretty irrelevant.
It's a great rental model to pursue and an amazing time to do it with the rate buydowns. I wish BTR would have existed when I began as an investor.
You really didn’t start hearing about BTR at all until about ten years ago.
Now, I appear as a guest on other business and investing shows. Quite a few times, the host asks me where the REI opp is today.
The answer that I’ve been giving is that it’s with build-to-rent properties and these rate buydowns.
An income-producing asset is like your employee that’s working for you—but without the personality problems. The property is also working for you 24/7.
Besides just helping you find the best BTR deals today, we can help set up an entire real estate investment portfolio plan for you.
-We can help build an income-producing RE portfolio for you with our free coaching. Truly free.
Now, if you’re new here, you might think that we’re trying to sell you something - and we aren’t.
The way it works elsewhere is that some people get attracted to the free thing and then once you’re on the phone or Zoom or free live, in-person event, they’re going to try to sell you their better PAID coaching or some online course for a fee.
We don’t even sell coaching or sell a course. This is free no-strings, no upsell, no catch coaching.
OK, it’s sort of the opposite of your auto dealer calling you about your extended warranty - an overpriced item that you don’t want. Ha! If you want to buy something from GRE, you can’t because we don’t even have anything to sell you. We are here to help!
Also, I have no problem with companies selling paid courses or paid coaching - not at all. Some courses are worth paying for. It’s just not what we do or have EVER done here.
But see, buying real estate that you own directly is still not as simple as just finding a keyboard and pressing: Ctrl, alt, Deal.
So that’s why our Investment Coaches help you learn your goals, and navigate the process. Then you’ll want to keep in touch with your coach because the best deals are often changing.
For example, you might think that you want to buy income property in, just say, Alabama, because its prices haven’t run up as much as they have in Florida.
But we keep regular lines of communication open with build-to-rent homebuilders nationwide… and say there’s a new community, in, Florida, where the real deals are going to be for the next few months…
…and though you still like Alabama, you like how Florida is growing faster so you end up going there.
Or there’s better cash flow with some BRRRR strategy properties in say, Ohio, that we have that your coach informs you about.
So, I encourage you. Get & maintain a line of communication with your GRE Investment Coach.
To review what you learned today:
Leverage is THE most powerful wealth creator.
You can make the case that homes are NOT overpriced today. Home prices aren’t up; the dollar is down.
No one knows the future. But there is ample room for more home price growth.
Build-to-Rent property keeps increasing in popularity… and investors can get mortgage rates on them as low as about 5%.
To contact an investment coach, it’s free, start at GREmarketplace.com.
Until next week, I’m your host, KW. DQYD!