A 90 day Treasury Bill yielded 0.02% at the end of May.
That reflects how much cash is currently worth – almost zero.
Inflation, on the other hand, climbed to 3.6% year-over-year in April – a 13-year high.
Holding cash, therefore, pays you a return of -3.6% annually right now when you back out inflation.
Asset values, on the other hand, are doing extremely well at this time – especially real estate.
Home Price Growth: U.S. vs. California
According the the National Association of Realtors (NAR), the median sales price of U.S. homes rose to $341,600 in April – up 19.1% year over year. Both are record highs.
Home prices in California performed even better.
According to the California Association of Realtors (CAR), the median price of a home in California rose to a new record high of $813,980 in April – up 34.2% annually. Over two-thirds of the homes sold were above the asking price.
The Trend is Always Your Friend
It is the average person on the street that makes the trend – and as investors, that is what we act on.
Ex-inflation, cash is currently losing 3.6% of it’s value on an annual basis – while homes in the U.S. and California are appreciating at a real 15.5% and 30.6% year-over-year clip.
Are we in another real estate bubble?
Probably, but until these trends change, investors are immeasurably better off investing in real estate than they are in cash.
Ride the wave until the wave ends – but that time is not upon us yet.
For years cash has been trash, but it will soon be a safe haven for investors.