I do not think it is reasonable to assume a random piece of land will appreciate at 3% per year over a period of 30 years. Not to mention the maintenance and renovation costs on a $1M home.
Maybe in the most popular areas, it would sell for 1.03^30 = $2.4M after 30 years, but in the vast majority of the US, that has not historically been the case.
Doesn't matter what a random piece of land does; the $200k you owe on your house is $200k more money you have to do other things. If the value of that money goes down by more than 1% per year, then the person with the 0% mortgate and 1% property tax is better off using any money in pocket for literally anything other than paying down the mortgage.
That is exactly how it works for millions of people who bought or refinanced with record low rates. If you borrow $1million at 2% interest, and inflation is 10%, you are profiting $80k/yr if you put the money in an asset that goes up in value with inflation.
Maybe I dont understand your central point, but your data seem to agree with me.
>I do not think it is reasonable to assume a random piece of land will appreciate at 3% per year over a period of 30 years.
It seems very reasonable to assume that average real-estate will at least increase with inflation.
Your links show that average home prices have increased 100% in 20 years, which is a little over 3% per year during that period. They also show that prices have increased faster than inflation.
>Maybe in the most popular areas, it would sell for 1.03^30 = $2.4M after 30 years, but in the vast majority of the US, that has not historically been the case.
Your link literally shows that the majority of US homes doubled in price in the last 20 years, (which is even faster than 30).
Sure, This level of overperformance releative to inflation is likely unsustainable. However, it is reasonable and conservative to assume that housing and land will at least increase with inflation on average. Population keeps increasing in the US and land is finite.
are you saying that 3%/yr increase in price is too low, and the real number is likely higher? This is better supported by your data.
Sorry, you are correct. I was reading the graphs on mobile which are cut off, and I did not check the x axis and thought the graph showed 50% increase in 20 years.
That's more or less what the data you linked to[1] demonstrates: a us average 3.5% increase per year. Not a median though, a mean. The median increase is probably more like 2% per year, but a lot of that seems to be localized to areas that didn't recover after 2008. If your area recovered after 2008, we can assume it's in demand and likely to continue to appreciate faster than the median, or closer to the 3% figure.
Maybe in the most popular areas, it would sell for 1.03^30 = $2.4M after 30 years, but in the vast majority of the US, that has not historically been the case.