Gold vs Real Estate Returns & Which Asset Beat Inflation? The 100-Year Performance
Gold rose 168x and US house prices 83x after 1926, while the money supply grew 503x. We compare gold vs real estate returns to see which kept its value.
Topic
The Wealth Illusion: When Prices Rise but Value Doesn’t
The wealth illusion is our name for the feeling of getting richer while your share of the money pool shrinks.
Read more
A homeowner whose house doubles in 15 years, or someone watching gold hit a record high, is often seeing the currency weaken as much as the asset strengthen, and Part I measures how much of each.
The clearest example we found was the median US house, which rose from $5,000 in 1926 to over $415,000 yet takes about half as many ounces of gold to buy today as it did then. Every safe-haven asset in that article rose enormously in dollars and still lost ground to the 503-fold growth in M2.
- 83x Median US house since 1926 $5,000 to $415,400, an M2-adjusted value of 0.17.
- 241 → 120 oz Median US house priced in gold Fewer ounces of gold buy a house today than in 1926.
- 168x Gold, 1926 to 2026 An M2-adjusted value of 0.33, so about two thirds of its share was lost.
Articles on Wealth Illusion
1 article from our research on this topic.
Plain-English definitions
Key terms for wealth illusion
- Nominal vs real
- Nominal figures are the dollar amounts you see. Real figures adjust them for something else, which in this research is the growth in M2.
- Monetary dilution
- The loss in each dollar’s share of the total money pool as new money is created, whatever happens to shop prices.
- M2-adjusted value 1.0 = break-even
- An asset’s growth divided by M2 growth over the same years. Above 1.0 it gained share of the money pool, below 1.0 it lost share.
- Safe haven
- An asset people buy to protect wealth in bad times, such as gold or property. Part I tests whether they did that against M2.
FAQ
Questions about wealth illusion
Answers drawn from the figures in our research. Educational only, not financial advice.
What is the illusion of wealth?
It is the gap between what an asset is worth in dollars and what it is worth as a share of all the money in circulation. In Part I, gold, silver, US houses and UK houses all posted huge nominal gains between 1926 and 2026, from 67x for silver to 439x for UK property, but none matched M2’s 503x. So their owners felt richer while their slice of the monetary pool actually got smaller, which is the illusion the whole series is named after.
How can I tell if an investment has really grown?
The test we used is to divide the asset’s growth by the growth in M2 over the same years. A result above 1.0 means it gained share of the money pool, and below 1.0 means it lost share, however good the price chart looks. Our inflation tracker has a money printing calculator if you want to run the same check on a sum of your own.
Sources