Are you buying a house or lottery ticket?

The same week legendary investor Warren Buffett put his California vacation house on the market, a friend told me her widowed mother had sold the family home in Cleveland.

Buffett bought his Laguna Beach place in 1971 for $150,000 and is asking $11 million. My friend’s parents bought their home for $24,500 in 1965 and just sold it for $104,000. Put another way: If Buffett gets his asking price, his house will have appreciated at an annual rate of 9.79 percent. The Cleveland house eked out a 2.82 percent annual return.

Neither buyer could have predicted what their homes would be worth now. One could score a healthy return, while the other didn’t even keep up with inflation. (If she had, her home would have been worth about $190,000.) In my latest for the Associated Press, how purchasing a home could be a gamble.

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Comments

  1. Ross Gentry says:

    Liz,
    Location, Location, Location…Cleveland is NOTLaguna Beach on the California Pacific coast.
    Ross Gentry

  2. Robert Dudley says:

    I am part of a trust that has been distributed to me. I received a K1 form. This money is tax free as taxes have been paid through the trust. I am on social security and a tax free retirement. So I have not filed taxes since my retirement. I want to gift a relative the maximum gift amount of 14K. Is there a requirement to report that to the IRS. Thank you Love your emails to me every month. Keep up the stellar reporting.

    • Liz Weston says:

      No. You can give any recipient $14,000 this year without having to file a gift tax return. Gift taxes aren’t owed until the amounts you give away in excess of $14,000 per person total $5.49 million.