Inflation Adjusted Real Estate Return Calculator

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In this article, we present a Real Estate Return Calculator, for quickly estimating the return on a house in many areas in the United States.  We guess the median values and actual returns for any of 356 American Metropolitan Statistical Areas in an attempt to tell all of our American readers how well their homes have performed as an investment.

Real Estate Return Calculator

How to Use the Real Estate Return Calculator

  • Estimated Values - We automatically populate 356 Metropolitan Statistical Areas, and attempt to guess the values of median homes at the dates you give us.  Note that hitting 'Populate' will snap the dates to our most recently loaded data - which is pegged to updates on the Freddie Mac House Price Index.  (This data goes back to 1975 in most areas.)  It will also load mortgage rate data on 30 year mortgages from Freddie Mac's 30 year mortgage rate report.
  • Starting Date - The date a house was first purchased.
  • Ending Date - Either the date the house was sold, or the ending date where a value is estimated.
  • Buy Price - Agreed upon value on starting date.
  • Sell Price - Either sale or estimated value on ending date.
  • Down Payment - Cash (not including closing costs!) put down towards equity when the house was bought.  (For a cash purchase, set the down payment equal to the buy price.)
  • Mortgage Rate/Term - Self explanatory.

Advanced - (Usually these are close enough; edit if you're brave)

  • PMI Rate - For dates when equity was less than 20%, what PMI rate was paid annually?
  • HOA - Monthly Homeowner Association Fee
  • Annual HOA Increase - Percentage HOA increases annually.
  • Property Tax Rate - Annual property tax on the home in question.
  • Property Tax Increases Capped? - If the state/city limits the increases in property tax annually, check this box and edit "Max Property Tax Increase" to set the annual increase.
  • Can Write Off Interest & Property Tax? - If the home owner could itemize deductions and write off mortgage interest and property taxes.  Also edit "Marginal Tax Rate" if you select this.
  • Starting Rent - How much did the home rent for on the start date?  (Note: this could also be used to compare "value versus renting" if you use a realistic estimate here)
  • Annual Rent Increase - The amount the rent increased every year.
  • Fees/Commissions Buying - Recording Fees, Taxes disguised with fees, agent fees, and whatever else came with buying the house, as a percentage of the purchase price.
  • Fees/Commissions Selling - Same thing, except for sales.  Note: do not count the realtor fee twice.  It is included in this field by default as the typical 6%.
  • Home Insurance - The cost, annually, to insure the home.


  • Show Table - Shows the sequence of cash flows we use to calculate (ahem, attempt to calculate - it doesn't always converge) the internal rate of return on your home purchase.
  • Annualized Real Estate Return - The amount this home returned annually.
  • Inflation Adjusted Real Estate Return - The amount this home returned annually after inflation was factored in.

The Sacred Belief - Homes Are "Good Investments"

Maslow may have been correct in saying that shelter is high (read: low) on your hierarchy of needs, but that doesn't mean your home is sacred.

Picture of a row of apartments
Was Your Old Apartment a "Better Investment"?

There's a weird belief - here in the Bay Area, certainly, but likely elsewhere as well (if our friends are to be believed) that in America, primary residences are the best investments that many people have made.  For the vast majority of Americans in the vast majority of time periods, that is absolutely not the case.  That's right - with very few exceptions comprising limited time frames in certain metro areas near Washington, D.C. and in California - the change you lose in your couch cushions is returning more to you than the home you live in.  Your home just really isn't a good investment.

This article is an attempt to show you just how much your home is costing you (or has cost you).  It's not so much an attempt to say that homeownership is "always bad", per se... but more an attempt to show you that you shouldn't be referring to your primary residence as an investment.  As the best alternative to not living in any sort of shelter perhaps... but an investment?  Not highly likely.

Oh, and before landlords hit the 'back' button - the calculator allows you to factor in rent - read on.

Ignoring the Important Cost Drivers in Homes

How many times have you had a conversation about home ownership - only to hear a story like this:

I bought this house for $100,000... and it's now worth $300,000!

The numbers are made up, but the amount of detail the speaker went into?  Accurate!

Okay, maybe there is a significant maintenance fee on some funds in your 401(k)... but that expense ratio is a pittance compared to the cost of a residence.  There are lots of ignored costs - Property Taxes, Mortgage Interest, Special Levies, Home Insurance, Transaction Costs, and the dreaded 'Maintenance' (not to mention HOA!).

Add to that the changing tastes of the American Homebuyer - laminate floors, stainless steel appliances, and granite countertops won't actually be "in" for the rest of our lives.

Don't discount those added costs.  While it's true that landlords will have to pay for similar things, rental stock (to live in - we aren't talking vacation rentals) generally pales in quality to homes in desirable neighborhoods.

Read: there are more houses in better neighborhoods for sale than for rent.  Also read: there are more rental properties with 70s era 4"x4" white tile with light grey grout which has slowly darkened with age and food preparation, plastic shower bases and builder grade carpets.

Yes, But You Have To Live Somewhere!

A reasonable counter, for sure... and if you are comparing like houses to buy versus rent, you can use the 'rental' fields to estimate what it would have cost you to rent.  Of course, if you aren't a landlord and are only talking about you best alternative... well, you're not talking about an investment anymore.  That's the point of this piece - most primary homes never pass the sniff test as an investment.

Regardless, it's a rare phenomenon for people to buy a lower quality home than the apartments they have rented.  At least with the same number of people pitching in- so, no, your Frat House doesn't count - nice try.

Sources and Methodology for the Real Estate Return Calculator

Thank you to Quandl, once again - we couldn't have aggregated all this information automatically (or simply) without them!

Everything updates automatically monthly, but the slowest series is the Home Price inflation series, which is running around 10 months behind as we type this article.

If you don't like the medians?  Change them, don't complain to me or any of the fine people at the bureaus and GSEs listed above.  Or, you know, you can build your own calculator.

The estimates come from your favorite internet writer... who has at various times rented and owned houses and apartments and condos in New England and in California.  If you don't like them?  Well, it's a calculator - override whatever fields you disagree with.

So, How Did You Do?

There's nothing more fun than beating the average and being the exception that proves the rule.  The house where I'm currently typing this paragraph - in the San Francisco Bay Area - is one of those exceptions (and it isn't even close).  Still, I recognize that it's an anomaly - for most people, this home return calculator will return some surprisingly negative news.

So, tell us - how did you do?  Did you enjoy the home return calculator?



PK started DQYDJ in 2009 to research and discuss finance and investing and help answer financial questions. He's expanded DQYDJ to build visualizations, calculators, and interactive tools.

PK lives in New Hampshire with his wife, kids, and dog.

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