Blog | Real Estate

How to Know the True Value of Real Estate

Discover the true value of real estate, commodities, stocks and even cryptocurrencies

Summary

• Inflation metrics are manipulated: don't rely on the antiquated ways to measure value

• By comparing real estate to commodities like gold and oil, investors can really understand something’s worth

• Instead of focusing solely on price, investors should use new methods, like the Hartman Comparison Index to determine true value

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Robert Kiyosaki once sent a warning to the Rich Dad community that the real estate market was cooling down. After all, we know that all booms go bust eventually, and every party comes to an end.

While many readers thanked him for the words of caution, many others sent hate mail his way. An angry real estate broker called him and said, "Are you trying to ruin my business?" The angry readers should draw insight from something Warren Buffett said: "For some reason, people take their cues from price action rather than from values."

While many agree with Warren Buffet’s approach, it turns out that following that advice can be a lot more difficult than previously thought.

What changed Robert’s view?

It is obvious that house prices are higher, so why would this very blog exist? Meet Jason Hartman, and be prepared to have your mind blown.

This blog contains a very important concept whether you are in real estate, gold, stocks, crypto, or anything. It answers a very simple question that is anything but simple: What is something really worth? What is something’s realvalue?

The problem in today's economy is that we can't measure value. It starts with the confusion around inflation. Gone are the days of old when inflation numbers were real.

Back then, to determine something's value, you simply took the current price and measured it against past prices including the rise in inflation. But now that inflation is a political number you must ask, “What is inflation and what does inflation mean?” How can you know when the inflation numbers we are told are not real, but instead are FAKE? If you cannot use inflation numbers, how can you determine what something’s worth?

The problem with the CPI

Currently there is the Consumer Price Index (CPI). This number is entirely manipulated. The Federal Reserve Bank just makes it what they want it to be and no one questions it. Unfortunately, this is a very important number. All cost of living adjustments are based upon the CPI. If the CPI goes up, then lots of things jump in price because it must be adjusted to. The same is true when they adjust it down.

Manipulation is not new to our world. Everything is manipulated these days. We're always trying to figure out the truth behind something, or what's real. It is nearly impossible because everything is so fake. Everything is a scam.

And it's not only what's real or what's fake, it's what can you say without getting taken off of certain platforms? What else is Facebook, Twitter, YouTube, and others going to censor? And what will they allow? That is why Jason Hartman, the founder and CEO of the Hartman Media Company and the Hartman Foundation, is so important in today’s world. Jason created the Hartman COMPARISON (not consumer) Index (HCI).

Jason –and his HCI’s –mission is to determine a true value even in a world that is highly manipulated, highly censored environment. Big tech companies are censoring everybody. You can't speak the truth anymore. It's like George Orwell's book, "1984." It's a very discouraging time and very disconcerting in many ways. But one thing that has a lot of data in it.

The power of true data

Why is data so important? Because, Jason says, communism and socialism have been a disaster every time in history and every place on earth as a direct result of the lack of true data. They did not have the data of accurate price signals.

Price signals contain just a fortune, a wealth of data in them. Every commodity in the market, whether it be a good or a service has a price, and that price is determined by hopefully a free market, or in our case, a relatively free market.

Note from editor: Read this part slowly as Jason explains the questions he asks and how he uses the data he collects.

When Jason uses price signals and all the data they have behind them, like why is the price of gold what it is, why is the price of oil what it is, why is the price of Bitcoin what it is, why is the dollar valued compared to other currencies at whatever value it is — when he uses all that data and takes roughly 40 of these products and services or commodities and services, and combines them into an index, he can then compare that index to real estate prices.

If the numbers are accurate, Jason’s HCI can potentially mitigate any downside risk and inform the user of possible upside potentials.

When Robert first started investing, he and Kim began by measuring the value of rent by asking, if you're living in your house, what would you charge yourself rent for? That's how they got the rental value.

When they bought their first house together, Kim had to go to their gold depository because they didn't have a dollar. They were buying their own personal residence up in Portland, Oregon and the loaners said they needed $23,000 upfront. Because their credit was so bad, Robert and Kim had to jump on this. So, they took the silver bars in grocery bags to the precious metals dealer down the street and got their $23,000.

Everyone around them said it was a good idea because real estate prices always go up. Of course, that is not true. (Remember 2008?) That is why the concept of this index is a sensible one. Right now, everyone is saying the real estate prices are through the roof. But Jason’s HCI might say otherwise. When the HCI compares real estate to real goods and services, one can see exactly where real estate stands. Not opinions, data.

When you compare the price of real estate to this basket of commodities and services, you can really determine a lot by it.

Let's take gold, for example.

Good as gold

If you go back to 1970, when we were still on the gold standard before Nixon took us off it, the median price house was approximately $22,000.

Back then, gold was $35. So, if you wanted to buy the median price house in gold, it would take 646 ounces of gold (22,000/35). Today, the median house price is about $348,000, give or take, depending on what index you're listening to. Gold is almost $1,800. So today to buy that house, it would only take 194 ounces of gold (348,000/1,800).

In other words, the “value” of a house today is less than a third the price it was in 1970. It's cheaper priced in gold.

What does this mean for the “average" person? What can one do with this information? When asked these questions, Jason responded with the following:

"There are two things that value everything on earth, scarcity and utility. If something is scarce, it's going to have more value. And if something is useful, it's going to have more value. So, gold is scarce and it does have value in the sense that it's been considered money for 5,000 years. So, if you stored your wealth in gold, rather than dollars, you would have been better off during this time because the purchasing power of the dollar, has declined dramatically and gold hasn't.

"With the knowledge from my HCI we can conclude that it is cheaper to buy a house in gold today, but more expensive to buy it in dollars. That informs that question. How should you store your wealth? The other question it informs is, what's next for the market? Is the market too expensive? Well, if you only think of things in dollars, then yeah, you're going to say, hey, it looks pretty expensive. But if you think of things compared to a whole variety of other commodities, you might say it's cheap. It depends on the commodity you're comparing to."

Jason's CPI in oil

Since oil fluctuates so much, can the same formula work?

Jason says it does because if you look at it over a long period of time, those fluctuations start to even out and become more accurate. This is why you can't just compare it to gold or any one commodity. Everybody simply compares housing prices to dollars. That's all they do. Why not compare it to a whole bunch of things that every human needs? Right now, oil runs the world making it the most important commodity on earth.

In 1970, oil was only $3 a barrel. We already stated that the median price house was $22,000. It would take over 6,700 barrels of oil to buy a house in 1970. Today, you still need to provide a lot of oil. The median house price now, as of June, is $348,000. And oil was $75 a barrel at the time. So today you only need to bring that seller 4,622 barrels of oil. So priced in oil, houses are cheaper. Priced in gold, houses are also cheaper.

If you had stored your wealth in gold or you would have been much better off in dollars. Now do you understand how to evaluate the true value of real estate?

Analyze assets the right way

Understanding real estate’s true value requires looking beyond manipulated inflation numbers and dollar-based price comparisons. By using alternative valuation tools like Jason’s HCI, investors can gain a more accurate picture of where real estate stands in relation to other assets. Whether comparing housing to gold, oil, or other commodities, the key takeaway is that price alone does not define value—scarcity, utility, and historical trends play a crucial role. Want to make smarter investment decisions? Start analyzing assets the right way today.

Want to learn more from Jason? www.jasonhartman.com