Real Estate Investor · Desoto, TX · Member since 2013 · 560 posts · 528 votes
Why aren’t rising house prices described as Inflation? Inflation is generally looked at as a bad thing. Appreciation of home prices is viewed as a good thing. If I am a homebuyer buying today as opposed to 8 years ago, I have seen massive price inflation. If I bought 8 years ago and selling today, I have seen massive price appreciation. Even if I sold my house purchased 8 years ago and captured the appreciation, I will have to pay a lot more to buy a similar house in my area today which goes back to inflation in my view. Most homeowners and buyers will still describe rising home prices simply as appreciation. When oil and gas prices rise, I never hear people running around talking about the appreciating oil and gas prices.
Is the difference in the use of the terms simply wordplay pressed upon us by the USG and Financial Services industry to help promote buying houses? I guess my mind wonders about silly stuff at times :)
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
9y
Appreciation is generally applied to assets and inflation to commodities. So homes and stocks appreciate. Milk and gas inflate. But either way it just means it costs more today than before.
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
9y
If I can walk into the same store with the same house (or title to it), and buy fewer sodas with that exact same house (or title to it) compared to yesterday, we would actually call that deflation.
So sure I guess you could call it home deflation. But not inflation.
House inflation would be if I walked into your soda store and purchased 100,000 sodas today, but could only purchase 80,000 sodas tomorrow.
They could. It would, I suppose, be an accurate statement.
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
9y
Appreciation is generally applied to assets and inflation to commodities. So homes and stocks appreciate. Milk and gas inflate. But either way it just means it costs more today than before.
Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
9y
Appreciation is the rise in value because people appreciate it more than before... Like a must have toy during Xmas. It's about consumer satisfaction with the product. You can still have flat prices with tight inventory if people don't derive the same satisfaction and have other alternatives.
Inflation is the erosion of purchasing power of a currency (mostly due to excess dollars in circulation like in Venezuela as the government keeps printing). It's not about spot price movements like milk prices rising due to shortages. Too many dollars in circulation creates a situation where the purchasing power erodes to buy the same item when the supply hasn't changed. With poor supply and too many dollars and little substitutes the prices artificially increase even thought satisfaction is the same like with basic items like milk or bread.
Supply and demand will also drive prices. If there is a flood of product into the market then prices fall. When there is a shortage then prices tend to rise.
Problem with extreme inflation situations, it tends to coincide with shortages of basic goods that people need to survive.
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
9y
Originally posted by @Account Closed:
Appreciation is generally applied to assets and inflation to commodities. So homes and stocks appreciate. Milk and gas inflate. But either way it just means it costs more today than before.
Of course, that only applies IF those things happen. Many homes are NOT more expensive than they were a year ago, just as many commodities aren't either!
The trick is: buying assets BEFORE they go up, and not going broke if they go down! Cheers...
Real Estate Professional · Pawtucket, RI · Member since 2016 · 133 posts · 79 votes
9y
@Daren H. you are so right but it is like looking at a glass half full vs half empty. It's a perspective seller vs buyer . If your the owner(seller) and the price goes up it's appreciation (good thing) but if your a customer(buyer) and prices go up your paying more for same thing (inflation) which is viewed as a bad thing. It's just part of the business
If I had $100,000 eight years ago to purchase house XYZ in my neighborhood but decided to wait and buy today, I would not be able to by house XYZ today at the same price. I either have to purchase a smaller house / less valuable house. The increased price of house XYZ reflects the same as an erosion in my purchasing power is the way I see it. Isn’t that inflation?
@Account Closed
I like I said above, one man’s appreciation is another man’s inflation. You never hear anyone describing the rising values of houses in terms of inflation though. I agree, it is what it is.
Thank you all for responding. Neither of you are wrong in my opinion. I was just curious about how others viewed this.
I can agree that casually we apply the term appreciation to assets and inflation to commodities. However, assets can be cars, trucks, machinery, equipment, etc. We don’t describe the rising prices of these things as appreciation generally. I agree, it all means that it costs more than before, but one man’s “appreciation” is more than likely another man’s price inflation (in the case of buying a house now as opposed to 8 years ago for instance).
And for cars, machinery etc we use depreciation, not deflation. ALso for rental property of course.
Real Estate Agent · Garden City, NY · Member since 2016 · 3k+ posts · 1k+ votes
9y
@Daren H. Inflation is measured by using a basket of consumer goods and comparing those over time using the consumer price index. That basket of basic goods is used so the comparison is apples to apples over time. It would be difficult to take a 2016 Rav4 and compare it to a 2006 Rav4 since the components and style are different. However, you can compare a basic good like a 2x4 piece of lumber over time.