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How Much Did Real Estate Cost 100 Years Ago?

3029609507_bf14b85ba2_bFor most homeowners today, the biggest housing turnaround of recent memory is that of 2006 when prices were at an all-time high and the market came crashing down, taking the rest of the economy with it. Housing prices have since risen steadily – back up to 2006 pricing in some markets – but are still less than 2006 levels when adjusted for inflation. But this most recent housing market crash certainly isn’t the only one as American real estate has had plenty of ups and downs for the past century.

100 years ago the year was 1916. Woodrow Wilson was President, World War I was going strong (beginning in the summer of 1914 and ending in November of 1918) and the railroads and the banks were booming. The government wanted the West to be settled and needed people to move that direction so interest rates were low and loans were easy to get. (Sound familiar?) 1913 brought about mass production in the auto industry and the process eventually made its way to the housing sector, lowering home prices across the United States. Real estate was a booming business.

But while the war was still going strong, the Spanish Flu Pandemic was ravaging the world, (affecting an estimated 550 million people across the globe and more than 25% of Americans.) The flu affected young Americans the most, killing more than half a million people. These deaths, when combined with unimaginable casualties from the War (more than 100K), created less demand for housing and the housing market began to take a turn for the worst.

So how would real estate in 1916 compare to 2016 if prices were adjusted for inflation?

Yale economist Robert J. Shiller created a “History of Home Values,” an index of American housing prices going back to 1890, inflation-adjusted to today’s dollars. Shiller reports that a house that would have sold for $85,000 in 1916 would have sold for over $200,000 in 2006 (at the peak of the market) and would sell for around $130,000 in today’s market.

What can we learn from this? The real estate road has felt bumpy at times over the past ten years but this isn’t the first time in history and it won’t be the last. But the history of American real estate over the past 100 years demonstrates that it is a great investment tool over the long-haul.

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