100 Years of Inflation

Happy 100th Birthday, House!As part of our home’s 100 year birthday celebration, we learned that the original cost to build the structure in 1911 was $8,000. Starting with that data point, I tried to do some figurin’ to see how much that is in today’s dollars.

Doing the calculation in my head was a very bad idea. Without actually thinking about it very much, I jumped to the conclusion that the $8,000 was “like a million bucks” in today’s dollars – it just seems like so much money for that long ago. Though, full disclosure, I wasn’t alive 100 years ago, so I don’t have a good sense of how much people earned or how much everyday items cost.

It turns out that adjusting $8,000 for 100 years worth of inflation results in a present day value of less than $190,000. (The government websites only go back to 1913, so I ended up using Tom’s Inflation Calculator – the results were consistent with each other). Far, far less than my initial guess.

Although I find this interesting, and perhaps you do too, it has no impact on the current market value of the home. None what-so-ever. Really, no cost information does.

Buyers don’t care how much the house cost to build 100 years ago. They don’t care about how much that new roof, furnace, or family room addition cost either. And they still wouldn’t care even if all of these projects were done last year.

Sellers are on the receiving end of this kind of logic too. Buyers like to take the current asking price and reduce it by the full cost of the improvements they feel need to be made. If they started with the estimated value of the home once the work was complete it might be more relevant, but they usually don’t.

I just wanted to get that out there – trying to justify a bid or asking price with cost information is an uphill battle. You’re more likely to have success with recent comparable sales and homes that are still available for sale. But even then it can still be a struggle to get buyers and sellers to agree on a price.

2 thoughts on “100 Years of Inflation

  1. We had an appraiser in yesterday and I was asking how much a kitchen or bathroom renovation would add to the value of the house. He said, as the kitchen was updated in the last 15 years and is quite usable, a renovation, no matter how fancy, extensive or expensive, won’t add to the value of the home but it may add to the marketability. I liked that distinction between value and marketability, neither which is based on cost-plus.

  2. Thanks for sharing, Meg, that’s a great point. In this market we’re definitely seeing buyers more attracted to recently updated homes, so they do sell faster … marketability is important.

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