Homes prices have lost 80% of their value when priced in gold.
It's my feeling that charts like this are fun, but not of value.
(a) Median home pricing (MHP) is an often quoted number, yet, while not meaningless, is often misleading. I can make the case that this number actually failed to note the real estate bubble, as MHP when normalized for the monthly payment required (this absorbs interest rate effect) didn't spike as Shiller's absolute number did. (b) There's a level with MHP just like P/E with stocks, that MHP tends towards. The mortgage one may borrow based on just over a week's pay. So, at 5%, the $1000/week (say $52K/yr for easy math) will fund $186K. You'll note, this number will go down as rates go up, and of course the down payment is needed. But Gold is nowhere in the observation. And of course, with just the two inputs (rate/income) it's not precise. It's just that median will not go above, say, 50% higher or 50% lower than this.
Joe
Imagine a chart of home prices when priced using 1GFLOPS computers - which once meant a supercomputer. A 1GFLOPS smart phone in 2010 is like Lawrence Livermore Lab's Cray supercomputer in the 1980's. So let's say that supercomputer cost $1 million (it was more). A home was then worth say $50k or 0.05 1GFLOPS computers. That home today might be worth $400k, which buys 4,000 1 GFLOPS computers (smart phones). That's a return of 7999900%!
Which only would have meaning if we paid for houses using 1 GFLOPS computers. The same might be said of gold? At least until someone comes out with the 3X inverse ETF tracking the 1 GFLOPS Computer Index.
-Tad
You probably raise these questions due to homes almost involuntarily looming large in the assets of people who plans their finances. Shiller from Yale tried to make this avoidable with a financial instrument tracking house prices, with which he expected home owners to use to hedge their house price (in good times as well as bad). He says he gets few customers. I have heard criticisms that his index isn't representative enough (he has a financial instrument that is separate but related to his famous index).
Commodities may be volatile, but have had a pretty steady upward bias as emerging economies join in on the good life. There are some reverses due to brainpower, such as fracking making natural gas abundant and crashing in price faster than electronics. Maybe the same will happen with rare earth mining, something I stupidly invested in even though knowing only epa regulations were preventing digging up tons of it. Quantitative easing has boosted commodities, but maybe it's demise is already starting to be discounted in prices.
Glaeser of Harvard has some observations about house prices being artificially pushed up in the past by some factors that might get redirected to support apartment buildings instead (in his ideal world as an economist). So a follower of his might want to hedge his house price and invest in apartment reits? I only caught part of his lecture so far:
BTW, there is an interesting yahoo article on how the Yale endowment fund recently lost it's famous and incredible mojo, and I think bears on these issues of unconventional asset allocations (but I lost track of it).
Oh, I found it and I guess it talks about alternative assets in endowment funds becoming highly correlated with everything else in a downturn (but I like their 30% yearly return of private equity, if there was any way to participate!).
My post possibly rambled afield, but I would like to point out even the crashing natural gas issue can be investable. GLNG ships the stuff by sea and has had stratospheric performance, even though based on long term contracts. So inverse commodity derivatives can work too.
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