Appreciation = Speculation

[Isi Nau]

This seems to be a widely held mantra here.  If you buy in a high appreciation market, you're not investing, you are speculating.  That's not something I have ever heard here in Hawaii.  Probably because it's not true!  Hahahaha.  If you know anything about Hawaii, you know to buy as much real estate as you responsibly can.  This has been true since the late 1800s.  But what does history know?  I've been investing since 2002!   ;)

A closer look at Hawaii.  In 1950 the median price of a single family home was $12k.  The median price is now $760k.  So in 67 years Honolulu has averaged just over 6% appreciation per year.  I would image areas like Los Angeles and San Francisco would show similar data.

During the recent recession, most areas in Honolulu dropped around 15%.  Cumulative!  These seem to be pretty solid figures.  In 67 years annual average appreciation of 6%, and only a 15% cumulative drop during the worst financial crisis of our time.  Is 67 years not a large enough data set to have confidence replace speculation?

If 67 years of sales history can't be relied upon, then neither can rent history.  If calculating future appreciation is speculative, then so would calculating future rents, or any rents for that matter.  That's ridiculous.

In other words, just because we've seen something happen for 67 years, doesn't mean it will happen again?  Wow!  Then why even invest?  I mean speculate.   :)

(This is not about appreciation vs. cash flow.  Both are great.  This is about using data to make educated investments and to help dispel poor advice.)