Steadfast FinancesMedian Home Price Measured in Gold, Not Dollars

Median Home Price Measured in Gold, Not Dollars

Filed in Real Estate 6 comments

When viewing the real estate bubble in a slightly different light — measuring median home price in gold, not U.S. Dollars — some similarities emerge between the 2005-2010 housing crash versus the 1970s housing crash when interest rates were in the teens.


Image Credit: Chart of the Day

Granted, there are a few differences between the 1970s-1980s and 2000s, but financial markets have a curious way of repeating themselves, so it begs two interesting questions since this metric is calculated by median housing price per ounces of gold.

  1. Will the median house price continue to fall?
  2. Will the price of gold continue to go up?

Not to sound like a gold bug and a real estate bear, but I’m thinking it will be a little of both since we’re still only halfway through the foreclosure crisis.

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Posted by CJ   @   23 April 2010 6 comments
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6 Comments

Comments
Apr 23, 2010
1:57 pm

Given that median home buyers and gold rarely appear together, does it make sense to plot median prices versus gold. How about median prices versus median income?

Apr 24, 2010
11:33 am

Why so much angst and bashing against the housing market Matt?

Things are rocking again here in San Francisco, as the physical property market is catching up to all the VC money pouring in and stock market run. We’ve got Facebook, Twitter, LinkedIn all eventually going public.

Apple and Google share prices are close to all time highs. It’s literally a rocking bull market.

Why so much negativity?

Apr 26, 2010
10:20 am
#3 Matt SF :

Fair question, but just because it’s a little used or unknown comparison doesn’t make it any less valuable. If the correlation is there (I’m not saying that it is), then in my opinion, it’s a viable metric worth tracking.

But from my vantage point, I think it’s a good measure of enthusiasm and fear about the financial standing (and financial future) of the U.S. Think back to the late 70s/early 80s when the Japanese were “buying America”, interest rates were in the teens, and Carter was infamous for his malaise speeches.

Here’s a home price to median income graphic for U.S. cities. Pretty interesting stuff…

http://steadfastfinances.com/blog/2009/04/23/5-lessons-potential-home-buyers-can-learn-from-median-income-vs-median-home-price/

Apr 26, 2010
10:36 am
#4 Matt SF :

I wouldn’t call it negativity or bashing. I’d call it my thoughts or opinion on where I think real estate (on a national basis) is heading.

But having dealt with a few Realtors and homeowners trying to sell their homes over the last 3 months, much of their reasoning is still based in 2005-2006 reasoning and simply refuse to accept 2010 realities.

My desired location is definitely different than San Fran, but just as an example, you can’t list your FSBO home at 129k when a short sale in the same building went for 50k last month. There is a huge disconnect between what owners want to sell for (presumably b/c they’re underwater) versus what mark to market is offering.

Jul 14, 2010
9:02 pm
#5 Charley2u :

1. Will the median house price continue to fall?
2. Will the price of gold continue to go up?

1. Yes
2. Yes.

Jul 14, 2010
9:09 pm
#6 Matt SF :

I agree on both questions. I think we’re at or near gold bubble territory, however, doesn’t mean the price of gold will slow down anytime soon.

Here’s another good pro-gold chart: the historical S&P 500 to Gold Ratio

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