U.S. Census dataThe price of new homes increased by 5.4% annually from 1963 to 2008, on average. (U.S. Census, PDF) New homes aren't the best yardstick -- we'd really prefer to see sales of
existing homes. But if new homes are all the U.S. Census gives us, then that's all we have to go on.
First, let's account for the fact that the average new home size exploded from
983 s.f. to
2349 s.f. from 1950-2004, or about 1.6% per year on average.
(NPR) So a big chunk of the increase isn't inflation, it's that bigger homes cost more money. O nce we factor that in, the price of new homes per square foot went up by only
4.2% annually from 1963 to 2008.
And now let's compare that rate to the general rate of inflation, which was 4.4% for the same period. (CPI, BLS) As predicted earlier, the rate of real estate inflation and the general rate of inflation are almost identical.
National Association of RealtorsThe price of existing homes increased by 5.4% annually from 1968 to 2009, on average. (Natl. Assoc. of Realtors, p.1, p.2) Notice that this is the same figure as
new homes by the Census Bureau for a similar period. Once we adjust for the fact that homes get bigger over time, the annual rate is
3.7%. The general rate of inflation during this time was
4.5%. So here again, homes didn't appreciate faster than inflation.
Case-Schiller IndexThe price of existing homes increased by 3.4% annually from 1987 to 2009, on average. (Wikipedia) We don't adjust for houses getting bigger, because the Case-Schiller Index tracks repeat sales of the
same homes. (They might get a little bigger from remodeling, but so few of them will get bigger, and by such a small amount, that we can safely ignore that.) The general rate of inflation during this time was
2.9%. So again, the appreciation rate for homes was very similar to the general inflation rate.