The 1980s' Surge In Home Prices Was Mostly A Mirage

At first glance, it looks like a healthy rise in value calculated to bring smiles to homeowners' faces. According to Census Bureau estimates, the median value of owner-occupied homes in the nation rose from $47,200 in 1980 to $79,100 in 1990. The problem with this rosy picture is that it involves what economists term "money illusion"-that is, the numbers are not adjusted for inflation. In real terms, says Census, the median value of owner-occupied homes rose just 5% during the past decade. And the true increase was even less than that, since the housing stock itself was upgraded during the decade as many new homes with more amenities such as central air-conditioning and extra bathrooms were constructed.

The modest appreciation chalked up by homes in the 1980s contrasts sharply to the gains enjoyed by homeowners in the 1970s. In that decade, reports Census, the real median value of owner-occupied homes soared by 39% as their current-dollar value nearly tripled, from $17,000 to $47,200.

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