House prices in gold (updated, longer series)

[*T*]

I posted this graph a while ago, and I think someone else posted something similar, but now I have history back to 1952. There is a gap where Bretton Woods broke down where I could not find the Sterling price of gold. Note the current bubble is far, far worse than the 60's-70's and we are due some serious pain.
There is still some way to go, but a large correction already. Long-term 'normality' seems to be about 120.

Average UK house price vs. 1 oz gold

source: Nationwide house index, Bank of England

[The Outback Oracle]

Re: House prices in gold (updated, longer series)

T why do you pick 120 as about normality? Do you have some maths behind the picture?
My guess is everyone looking at this graph can draw different lines on it.

As an observation, in these times, given the pressures that have built up in our societies and economies over a period of 40 years or more, anyone who draws straight line projections on these graphs is assuming far too much about the past turning into the future in a straight line.

[*T*]

Re: House prices in gold (updated, longer series)

I agree 120 is a bit arbitrary. However the ratio does seems to be comparable across nations. I'd be curious to see the Oz, Spanish, German and US data.

[WDCRob]

Re: House prices in gold (updated, longer series)

Someone's (maybe Charles McKay?) has a similar chart that goes back a few centuries IIRC. And it's annotated with a lot of interesting detail as well.

I believe there's a recurring low point where roughly 100oz will buy an average American home.

[Andreuccio]

Re: House prices in gold (updated, longer series)

Someone's (maybe Charles McKay?) has a similar chart that goes back a few centuries IIRC. And it's annotated with a lot of interesting detail as well.

I believe there's a recurring low point where roughly 100oz will buy an average American home.

It was Charles McKay. I tried looking for it (briefly) but without success.

[zoog]

Re: House prices in gold (updated, longer series)

It was Charles McKay. I tried looking for it (briefly) but without success.

I think whatever image hosting he was using no longer has the link active, same thing happened to mine that I posted back in February or so.

So I rummaged around and dug out my chart for the US, annual data 1900 - 2007. No interesting annotations or multiple centuries to look at but, here it is.

[Slimprofits]

Re: House prices in gold (updated, longer series)

I saved MacKay's chart as a .pdf. It is attached to this post.

If he wants me to remove this post, I will.

[jimmygu3]

Re: House prices in gold (updated, longer series)

I posted this graph a while ago, and I think someone else posted something similar, but now I have history back to 1952. There is a gap where Bretton Woods broke down where I could not find the Sterling price of gold. Note the current bubble is far, far worse than the 60's-70's and we are due some serious pain.
There is still some way to go, but a large correction already. Long-term 'normality' seems to be about 120.

As I have said many times, US median house size has doubled since 1950. Comparing an ever-growing house to a static ounce of gold is like comparing a 1200sf house to smaller and smaller gold coins. The only reasonable metric I can see is gold grams per square foot (gg/sf), as shown in my chart below. It gives the best idea of what that 1200sf 1950's ranch would go for over the last half century, rather than comparing apples and bigger apples. We are below the 1930s now, about to dip below the 1980 century low of 1.8 gg/sf.



As for your observation about 120 oz / house, today that would be $108k, a price for which you can buy a nice 1950's ranch in most of the country. (OK, not in the best areas of big cities or in bubble markets, but a lot of places).

Jimmy

[bart]

Re: House prices in gold (updated, longer series)

As I have said many times, US median house size has doubled since 1950. Comparing an ever-growing house to a static ounce of gold is like comparing a 1200sf house to smaller and smaller gold coins.

While that's true, in order to do a more valid comparison you also have to adjust for total acreage on which that median house sits. Acreage has gone down significantly and depending on where the house is located, the land value can easily be over half the price.

[*T*]

Re: House prices in gold (updated, longer series)

If anything the average UK house size has decreased.

I'd love to see Mackay's updated graph.

MACKAY? YOU THERE?

jimmygu3 - would that be some kind of hedonic adjustment ;)

It's a timing question for me... I'm feeling we are getting much nearer the infexion point as non-shiny things get cheaper.

[WDCRob]

Re: House prices in gold (updated, longer series)

If houses are bigger only because of screwy financing that subsequently disappears, and real incomes are unchanged or falling what does that do to your gg/sf metric Jimmy?

At some point isn't the size of the median house irrelevant? Isn't it ultimately dependent on incomes?

[jimmygu3]

Re: House prices in gold (updated, longer series)

If houses are bigger only because of screwy financing that subsequently disappears, and real incomes are unchanged or falling what does that do to your gg/sf metric Jimmy?

At some point isn't the size of the median house irrelevant? Isn't it ultimately dependent on incomes?

WDCRob, you always make good points. I don't think size is irrelevant, but you're right that prices are very much dependent on incomes, as well as availability of credit and interest rates. I think future new home construction will be geared toward smaller homes (condos?), bringing the median size back down. EJ also predicts the subdividing of McMansions.

As I outlined in a previous post, a 1200sf home in 1955 cost 2.65x the median household salary, while the same home in 2008 would cost 2.35x salary. Some people have made poor choices, selecting homes that are too large for their budgets and the market is correcting for that. But apples to apples, homes are cheaper now than they have been for most of our lifetimes.

Unpopularly yours,

Jimmy

[bart]

Re: House prices in gold (updated, longer series)

As I outlined in a previous post, a 1200sf home in 1955 cost 2.65x the median household salary, while the same home in 2008 would cost 2.35x salary. Some people have made poor choices, selecting homes that are too large for their budgets and the market is correcting for that. But apples to apples, homes are cheaper now than they have been for most of our lifetimes.

Unpopularly yours,

Jimmy

Indeed, and your observation is also shown/confirmed by home prices fully adjusted by CPI w/o lies.

[jtabeb]

Re: House prices in gold (updated, longer series)

Indeed, and your observation is also shown/confirmed by home prices fully adjusted by CPI w/o lies.

That's why I just told my mom to get out of her rental and buy a house NOW!! She's a fixed income retiree. (Don't worry, her bullion investment will carry her through if I'm wrong.

[bart]

Re: House prices in gold (updated, longer series)

That's why I just told my mom to get out of her rental and buy a house NOW!! She's a fixed income retiree. (Don't worry, her bullion investment will carry her through if I'm wrong.

Here's a chart I built a few months ago on request from a few who wanted a general guideline for real estate buying & selling: