Originally published July 3 2005
Real estate bubble creates wealth, if you pick the right home
by Mike Adams, the Health Ranger, NaturalNews Editor
A recent article in Lew Rockwell describes the skyrocketing real estate market and its relationship to investments and savings. Accordingly, the way to wealth in this decade is not the result of savings, but the right real estate choices.
Scott Burns is just about my favorite real-world financial columnist.
Thrift made savings available to businessmen, who in turn found ways to increase production.
Check the net worth of different households, and you quickly learn that homeownership is more than important for most Americans.
One odd side effect is that people in some parts of the country are becoming much richer than people in other parts of the country not because of the work they do, the income they earn or the investments they make -- but because of where they live.
You can see the impact by reading the most recent house price index report from the Office of Federal Housing Enterprise Oversight, better known as OFHEO.
Unlike the median home price resale figures provided by the National Association of Realtors, the OFHEO figures are based on tracking the resale and refinance data of the same homes over time.
That's a compound annual appreciation rate of 8.4%, more than three times the 2.56% annualized rate of inflation over the period.
For most people, that gain more than offset any stock-market losses suffered when the Internet bubble burst.
For most people, the return on savings cannot compete with this increase in net worth.
But, long-term, we get rich because of increased productivity, which in turn rests on a combination of thrift and successful entrepreneurship by the people we handed our money to.
Comparable California homeowners saw their net worth rise by about three years of income.
The money lured out of the capital markets and into housing is not going to make investors richer unless they really are investors, buying as investors, managing properties as investors, and renting their houses to productive people who can pay the rent.
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