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Home Prices Aren't Really Up. Here's Why.
• 43 minIn 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. Resources mentioned: For access to properties or free help with a GRE Investment Coach, start here: GREmarketplace.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments. You get paid first: Text FAMILY to 66866 For advertising inquiries, visit: GetRichEducation.com/ad Will you please leave a review for the show? I’d be grateful. Search “how to leave an Apple Podcasts review” Top Properties & Providers: GREmarketplace.com GRE Free Investment Coaching: GREmarketplace.com/Coach Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— text ‘GRE’ to 66866 Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Keith’s personal Instagram: @keithweinhold 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. _____________ 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
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