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Comment by doitLP | Hacker News Reader

> it's not worth over a quarter of a million dollars

What is worth a quarter million? How do you assess the value of your home?

The home was assessed at over a quarter of a million dollars, for both taxes this year, and by an independent assessor when we refinanced.

I'm saying I have a decent home, but that amount of money is unrealistic. It cost $100,000 to build, 11 years ago. I cannot be convinced it almost tripled in value, in any realistic market, in 11 years.

What’s the value of the land and the sweat equity? You may have paid $100k and time but the buyer is paying all in currency for the finished product.

Land is maybe 20k, 25-27k at a stretch. 15-20k in sweat equity, if I had to guess.

The math just isn't there.

What have comparable homes sold for in your area recently?

I don't think you are thinking about this correctly. Have you considered the impact of compound interest? You say it cost you $100,000 plus "a massive amount of sweat equity" . I don't know what you consider massive, but let's guess at $50,000 worth. That is, if you were paying market rates at the time to professionals, how much would they have charged, plus the cost of hiring them, plus the taxes you would have paid to have the money to pay them, etc?

Anyway, if we start with an actual "cost" of $150,000, you get to $250,000 with 11 years of compound interest at 5%. If we instead completely ignore your labor input, 11 years at 9% gets us from $100,000 to $250,000. Can you really not be convinced that "realistic market" might not have a 5% (or 9%) yearly increase in value? That's not to say it will always go up that much, but it doesn't seem unrealistic that it might.

The bigger question of course is how we determine "value". Is $250,000 for a house today any more "realistic" than $100,000 to build it 11 years ago? Not by any objective measure. They are both just numbers, determined by how much people are willing to pay, which in turn depends on how much they have in their bank accounts, which in turn depends on how much someone is willing to pay them, which (circularly) depends on how much someone else is willing to pay for something else. There's nothing "realistic" about any particular numeric value.

Inflation is about 2-3% per year, so that brings the real appreciation down to 2-6%.

That doesn’t tell the whole story, however. The 2008 stimulus plan basically printed money in the form of increased stock valuations and cheap mortgages. Stocks and housing have inflated well over 3% per year since then, while consumer prices have not.

Eventually that has to unwind. One option is for the federal government to claw the money back. That will lead to deflation and immediate economic ruin, so they can’t do it.

The more likely option is that we eventually hit a patch of high consumer price index inflation as workers start charging a living (housed) wage for their time.

> Stocks and housing have inflated well over 3% per year since then, while consumer prices have not.

Pretty much only the west coast has seen inflating home prices. For the rest of the country, inflation adjusted price per square foot hasn't really changed [0]. And Inflation adjusted Annualized S&P 500 Returns with Dividends Reinvested for the past 15 years are 6.738% versus 7.690% for the 15 years before that [1].

0]: https://www.supermoney.com/inflation-adjusted-home-prices/

[1]: https://dqydj.com/sp-500-return-calculator/

It doesn't really matter what it cost to build or how much time elapsed.

Try to sell it, see what kind of offer(s) you get--that's exactly to the penny what the home's value is.

I just sold my home for just about 3x what I paid for it in 2009 (used house though)

[shrug] Between 1998 and 2003 my house in Minneapolis doubled in value. A year later (after I sold) it had gone up by 50%.

Tripling in value after 11 years, when you bought at the bottom of the market doesn't seem surprising at all.

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