It is probably viewed as good news when you realize that the house you bought 10-15 years ago is now valued at twice what you paid for it. Before you break out the champagne, consider the down side. While the good news is the increase in value, the downside is the significant increase in occupancy costs.
Real estate taxes and casualty insurance premiums probably more than doubled during the period, more or less, depending on the location. Utility bills, electricity, natural gas and water, have also risen, in some areas, quite a lot. In addition, you are probably paying far more for internet, entertainment and other electronic services.
If your income has not kept pace with these occupancy cost increases, or may not in the future, you might have a serious problem. Investors may be able to ameliorate some of these issues by making portfolio decisions that are likely to result in increases in income and/or net worth, that can potentially better keep pace with inflation.
All comments and suggestions are welcome.
Walter J. Kirchberger CFA