Tuesday, June 14, 2011

Residential Real Estate Priced in Gold

Here is a chart, from Chart of the Day, illustrating the long-term historical performance of real estate converted to gold. Yes, things have changed. It might appear that gold is nearing a peak in value and/or that real estate is near the bottom in its swoon. It could turn out to be that way, though there is a higher probability that the issues surrounding the US $ and other major currencies will dictate the rise and fall in gold. I share the opinion of others, gold goes higher. A lot higher.

Declining real estate prices continue to be a concern for investors. For some perspective on the magnitude of the decline in home prices, today's chart presents the median single-family home price divided by the price of one ounce of gold. This results in the home / gold ratio or the cost of the median single-family home in ounces of gold. For example, it currently takes a relatively low 106 ounces of gold to buy the median single-family home. This is dramatically less than the 601 ounces it took back in 2001. When priced in gold, the median single-family home is down over 80% from its 2001 peak (to a level last seen in 1980) and remains well within the confines of a six-year accelerated downtrend and continues to close in on its 1980 trough.