Phantom Gains: The Metros Where Inflation Claims the Bulk of Equity Since 1990

As lawmakers consider a proposal to index capital gains to inflation, it raises a hard question for homeowners: How much of your equity is actual wealth, and how much is just a byproduct of the rising cost of living?

Previous reporting from Realtor.com® laid bare how a failure to index the capital gains exclusion limits has already exposed 1 in 3 homeowners—nearly 29 million households—to a hidden home equity tax. By 2030, that figure is expected to reach 56%.

And while previous proposals for reform focused on simply raising those limits, new proposals suggest a more fundamental shift: indexing the purchase basis itself to separate nominal gains from real appreciation.

That forces a tough calculation for homeowners. While your home sale price today may seem like a windfall, looking back on what your dollar bought you then versus now may reveal a narrower return on investment.

To measure that tension, Realtor.com analyzed home price growth against the consumer price index since 1990 in 50 metropolitan areas. The results overwhelmingly show that homeownership has been a powerful wealth builder over the past 35 years, with values outpacing inflation by a significant margin in most of the country. 

But the data also underlines a persistent risk: In high-appreciation markets, even the current proposals to index gains may still leave many longtime homeowners exposed to a hidden home equity tax.

In nearly every major metro, home prices beat inflation

From 1990 to 2025, home prices beat inflation in 49 of the 50 metros analyzed. 

In the median metro, prices rose about 1.56 times faster than the CPI, and in nine high-growth markets, prices rose more than twice as fast as the cost of living.

Jake Krimmel, senior economist at Realtor.com, says the findings should offer homeowners some relief, regardless of when they purchased their home.

"The past few years of high inflation and modest nominal house price growth are the exception, not the rule," he explains. "This should not be surprising considering how low inflation has generally been over the last 30-plus years, plus the fact that the housing market has done a lot more booming than busting over that time."

In other words, the results are generally good news for homeowners, because it suggests that the bulk of their equity represents a real return on their investment. And in the highest-performing markets, the distinction between real and nominal gains is especially stark. 

Take Salt Lake City, for example—the metro where home prices beat inflation by the largest margin. 

A home purchased there for $100,000 in 1990 would see its indexed basis rise to about $246,000 by 2025. Yet, because the local home price index skyrocketed by such a high margin, that same home would be valued at roughly $689,000 today—or roughly $443,000 in real gains.

It’s a tidy profit, but one that also exposes the limits of indexing capital gains to inflation.

While indexing the basis provides a much-needed buffer, it isn't a total shield. If this Salt Lake City homeowner were a single filer, they would still find themselves far over the $250,000 exclusion limit, proving that in some markets, even the most favorable cost basis might not be able to fully outrun a stagnant tax code.

That’s part of the reason that Krimmel thinks focusing on exclusion limits may offer homeowners more protection.

“I would prefer reindexing those thresholds to a more reasonable level rather than indexing purchase price to inflation, though,” he says. “There's a difficult trade-off. On one hand, raising the threshold gives yet another tax break to older, wealthier households—so it's regressive in effect. On the other, for markets sorely in need of inventory, if older homeowners are not moving in order to avoid a tax penalty, then that's not ideal either.”

Bryan Greene, vice president of policy advocacy at the National Association of Realtors®, agrees, pointing to the More Homes on the Market Act—which would double the current exclusion limits and index them to inflation going forward—as his preferred solution.

"The bill is aptly titled as it would lead to more homes on the market for consumers to buy," he says. "It also benefits all consumers. Long-tenured homeowners who want to sell would be incentivized to do so as they would be able to retain more of the equity they've built up—many are looking to downsize or move to retirement communities. Trade-up buyers would find more homes on the market to purchase, in turn, and more first-time homebuyers could obtain starter homes that would be freed up."

Where inflation explains the most

At the other end of the spectrum are the places where inflation drove the majority of homeowners’ gains. Hartford, CT, is the most obvious example, because inflation actually beat the local home price index there from 1990 to 2025. 

To put this in perspective, once again consider a home purchased for $100,000 in 1990, for an adjusted cost basis of roughly $246,000 today. 

Since then, home prices in Hartford have roughly doubled, bringing the property's current market value to approximately $229,000. But, when adjusted for inflation, this represents a $17,000 loss in real value.

It’s a good example of how inflation can quietly erode a homeowner’s return. While a seller might see a much higher number on paper than what they originally paid, that perceived profit has actually been swallowed by the rising cost of living.

Importantly, this example doesn’t mean every homeowner in these areas lost money—it's just a representative figure, and it doesn't account for renovations or other neighborhood-level variations that can play a huge role in returns on investment.

But at the metro-index level, Hartford illustrates exactly why inflation indexing is such a significant policy shift.

It’s not a dynamic unique to Hartford, either. In metros like Cleveland, Memphis, Chicago, and St. Louis, inflation would absorb a significantly larger share of the apparent gain than in the high-growth hubs of the West and South.

What's next for homeowners

As Washington debates how to modernize a tax code, the data highlights the complex implications for homeowners: Inflation indexing is not a silver bullet, but it is a necessary lens. 

For some, it may reveal that their hard-earned wealth is little more than a hedge against a devalued dollar. For others, it proves that despite the noise of rising costs, the American dream of homeownership has still managed to deliver a significant win.

The challenge ahead for both homeowners and lawmakers will be distinguishing between the two—ensuring that those who have truly prospered pay their share, while those who have simply kept pace aren't taxed for the privilege of standing still.