Today’s track: Crazy — Gnarls Barkley
The Philadelphia Fed just published a chart that took nearly a decade to build. Three researchers pulled 2.7 million old newspaper listings — for-sale ads, for-rent ads, 1890 forward, 30 cities — and built the longest home-price series that exists for American cities. Inflation-adjusted, 1890 to 2024:
San Diego, up 1,225%. Los Angeles, 1,063%. Boston, 521%. The country as a whole, 354%.
Louisville: 64%.
St. Louis: 6%. Six. In 134 years.
The obvious read is "Louisville doesn't appreciate." That's how it's getting posted. And the obvious read is wrong, because the researchers tell you exactly why the gap exists, and it isn't geography. It's building. Where a city can build, prices flatten. Where zoning or the ocean blocks supply, prices compound. Atlanta kept prices flat for a century by adding more than 1.5 homes per 100 residents every year. LA didn't, and you know what LA costs now.
Louisville built. That's the whole story of the 64%.
And that's the reason a duplex here still cash flows. You can't have both — a market that runs 1,200% and a market where the rent pays the mortgage. San Diego chose one. We got the other. They come for the cashflow. I've been writing that sentence for years. The Fed just handed me 134 years of footnotes.
There's a second thing going around this week that I can't stop thinking about. People relocating are apparently pulling up Strava heatmaps — the running and biking data — to decide where to live. Somebody quote-tweeted it: "Pretty cool that being able to step outside in your own neighborhood is now a sign of affluence."
I'll say the realtor thing first: a heatmap is not how you pick a neighborhood, and it's not how I'll ever help you pick one. It's a map of who logs workouts on an app. That's it.
But the quote-tweet is the part that stuck. A sidewalk. A park you can walk to. A loop you can run without thinking about it. That's what people are actually hunting for, and it's the thing a chart of prices will never show you. The 64% is what Louisville costs. Being able to step outside is what Louisville is worth.
So here's the question I've been chewing on. Somewhere in the last few years a lot of people forgot why anybody buys real estate in the first place. Bitcoin ran. The S&P did 15% a year for a decade. Rates went from 3 to 7. And "buy a house" started to sound like your dad's advice.
Say it out loud at a party now — "I'm putting my money in a duplex in Louisville" — and somebody's going to look at you like you're crazy. Possibly. Probably.
Let me make the case fresh. With numbers, not vibes.
Start with the boring truth. The most thorough study ever done on this — sixteen countries, 1870 to 2015, every asset class — found that housing returned about the same as stocks over 145 years. Same return. At less than half the volatility. In the U.S. specifically, stocks did 8.4% real a year and housing did 6% — but the stock number came with a 22% standard deviation and the housing number came with 8%. Sixty percent of the housing return was rent. The rent shows up every month whether the market feels like it or not.
Stocks give you the return with the ride. Real estate gives you most of the return with half the ride.
Now add the thing stocks can't do. Nobody will lend you 75% of the money to buy an index fund, at a fixed rate, for thirty years, and let you pay it back with dollars that get cheaper every year. A bank will do that for a duplex on Tuesday.
Run it. Twenty-five percent down. The house goes up 4% — Louisville's 30-year average is 3.9%, and the last ten years it's been 6.3%. Four percent on the house is 16% on your money. Add the principal the tenant paid down. Add the cash flow. Add the depreciation. A four-percent year is a twenty-percent year. That's not a hot take. That's arithmetic.
And here's the part nobody says out loud: in 2008, when the country fell 27%, Louisville fell 2.4%. Two point four. Leverage is dangerous in a market that swings 27%. It's a gift in a market that swings 2.
The bank takes the inflation. Rent in this country is up 176% since 1996. Somebody who locked a fixed payment in 1996 is paying it today with 47-cent dollars. Their rent-paying neighbor's cost nearly tripled. Same 30 years. One of them is done.
Then the tax code, which is written by people who own real estate. A $250,000 duplex with a $200,000 building gives you about $7,300 a year in depreciation — a paper loss on a property that's putting real cash in your pocket. As of last summer, 100% bonus depreciation is back permanently; a cost seg on that same duplex can turn year one into a $55,000 deduction. Short-term rentals with average stays under a week can use those losses against W-2 income. Sell and 1031 into something bigger: zero tax today. Refinance and pull your cash out: zero tax, ever, because debt isn't income. Hold it until you die and your kids inherit it at today's value: the gain disappears. Kentucky's income tax is a flat 3.5% this year, down from 4.
Compare it. A $250,000 gain in an index fund for a married couple making $300k is about $55,000 in tax. The same gain, rolled into a fourplex: zero. Bitcoin can't 1031 — the IRS was explicit. Gold doesn't depreciate. A 401(k) is a great tool that taxes you as ordinary income on the way out.
I'm a Bitcoin believer, and I'll keep being one. It's done 37% a year since 2013. It's also lost 77% or more three separate times, it's down 38% from last October's high as I write this, and it has never once paid me rent. It's the swing. Real estate is the ground you swing from.
And now the part that actually gets me fired up. This is the biggest transfer of wealth in human history, and it's happening in houses. Boomers hold half the home equity in America — $17.3 trillion — and three-quarters say they're leaving the house or its proceeds to family. $124 trillion changes hands by 2048.
Meanwhile: the median homeowner in this country is worth $396,200. The median renter is worth $10,400. That's not a gap, that's a different species. For the bottom half of American households, the house is 47% of everything they own. For the top 1%, it's 12%. Real estate is not how the very rich hold their money. It's how the middle gets there.
And the young are falling off the ladder. At age 30, 55% of the Silent Generation owned a home. Boomers, 48%. Gen X, 42%. Millennials, 33%. Gen Z sits at 27%. The first-time buyer share just hit 21%, the lowest ever recorded, and the median first-time buyer is now 40 years old. Forty.
Which means the people who do buy in their twenties and thirties are going to look, in 2050, the way the boomers look now.
You want a specific move? Pick one:
House-hack a duplex. Live in one side, let the other side pay the note, and your half gets the $250k tax-free gain when you sell.
Flip one. Kentucky flippers cleared a 39.5% gross margin in the first quarter, against 25.4% nationally, because the buy-in here is still cheap.
BRRRR one. Buy it ugly, fix it, rent it, refinance your money back out tax-free, do it again.
Buy the fourplex. Louisville delivered a record 4,800 apartments in 2024. It'll deliver about 1,800 this year and start maybe 1,000. Our rents are $1,207 against $1,743 nationally, on stabilized cap rates in the low-to-mid 5s. The supply cliff everybody talks about nationally is steeper here.
Buy the warehouse. Louisville industrial vacancy is 3.9%. UPS moves 416,000 packages an hour through Worldport. We are the shipping closet of the eastern United States and nobody in this city acts like it.
Put a nice place on Airbnb. Louisville listings averaged $30–40k a year; Bardstown's averaged $44k and grew 34%. Derby weekend clears $2,500 a night. Just get the permit — the rules changed in 2023 and I'll walk anyone through them.
Simple, not easy. Those are two different words. But 134 years of data says the boring asset in the boring city is the one that made regular people rich, and the bank is still willing to be your partner.
Does that make me crazy? Maybe. I'm in good company — every boomer with a paid-off house was crazy once too.
Nobody rings a bell. You just have to be at the table.
📊 Yesterday's poll: [ROB — paste Monday's results + one-line take before scheduling]
What's your next real estate move?
The Top Five is ready as always — five real deals on the Louisville MLS this morning, five ripe for a lowball, my math on every one. If you read the whole thing above and thought "okay, but which one," reply "FIVE" and I'll send you today's list. One-to-one only. Rules are rules.
With Enthusiasm,
Rob Bergeron
Owner–Realtor at Award-Winning Winner Realty
Winner Realty | OffMarket.deals | Property Partner Data Company
Schedule time to discuss your goals, bottlenecks, or whatever’s on your mind — book me here.
PS: Thinking of Wendell this morning in his passing. I once gifted Matthew Coleman (lead song writer for The Red Clay Strays) a signed copy of book of poetry by Wendell Berry. In hopes that I could impact the art that impacts me. Wendell has some excellent writings about Red River Gorge as well. Great man to read up on.
“There are, it seems, two muses: the Muse of Inspiration, who gives us inarticulate visions and desires, and the Muse of Realization, who returns again and again to say "It is yet more difficult than you thought." This is the muse of form. It may be then that form serves us best when it works as an obstruction, to baffle us and deflect our intended course. It may be that when we no longer know what to do, we have come to our real work and when we no longer know which way to go, we have begun our real journey. The mind that is not baffled is not employed. The impeded stream is the one that sings.”
― Wendell Berry
PSS:The Fed chart, if you want to lose an hour: philadelphiafed.org, search "historical housing prices." Louisville's line starts in 1890. Find the year you were born and see what a house cost. Then find the year your parents bought theirs.
PSSS: We are looking to hire associate brokers in Kentucky and Southern Indiana! Would love to chat!