Between 1974 and 1980, home values increased 29% in Manhattan. Between 1980 and 1989, home values increased 155%. Between 1989 and 1996 values dropped 32%. 1996 to 2006 saw major growth of 185%. And, finally, between 2006 and 2017, home values increased 63%.
Over the last 40 years, Manhattan real estate has appreciated in value, on average, about 9% per year after adjusting for inflation. To put that into perspective, the S&P 500 has increased 7% per year in real dollars (after adjusting for inflation).
To further illustrate the point: $100,000 invested in NYC real estate in 1974 would be $24,515,772 today ($4,577,906 in 1974 dollars). The same $100,000 invested in the S&P 500 would be worth $9,823,835 ($1,834,435 in 1974 dollars). By investing in NYC real estate over the S&P 500, you would be up by $13,000,000.
In contrast, stocks have grown an average 7% per year. 2% of this appreciation takes the form of real capital gains, and 5% is comprised of dividends. The "dividend" equivalent for land would be the value of passive income (in agriculture, crops; in commercial or residential real estate, rental income) while the owner still owns the land.
This goes to show that long-term investors—investors who commit their money for a full 10 years of ownership or more—do well in Manhattan, especially if they buy their homes at moments when prices are relatively low and sell when prices are relatively high.
Across the U.S.: Hoyt’s 18-Year Cycle
One of the most renowned financial thinkers of the early 20th century, the economist Homer Hoyt developed a model for depicting real estate cycle trends in the United States that continues to be relevant to today’s market. By studying growth, sale and constructions in Chicago and other cities across the country, Hoyt concluded that the real estate cycle ran its course according to a steady 18-year rhythm since 1800. The table below shows the story: