I don't think you should compare home prices to gold

[Unbeatable]

I was really worried looking at this because for those of you that don't know home prices in the UK are still over-valued but this chart was telling me that we'd nearly reached the bottom. But as I know we haven't reached anywhere near the bottom it must mean that gold could be starting to become over-valued!?

But then I realized something -

Comparing the value of something (X) to gold is the best way to get an idea of it's fair value as long as gold is fairly independent of X. But if that something (X) is responsible for significantly moving the pricing of gold then that relationship will be distorted.

So in the past house prices weren't specifically responsible for moving gold, but this time the housing crash caused the global credit crisis which is mainly what has driven gold since 2007. (So while house prices were crashing, instead of gold staying fairly stable, it is moving in exactly the opposite direction with equal speed.)

Had the housing correction not caused a global crisis and loads of QE considering gold was at 650 in 2007 you might expect to see gold trading in the 850-1000 range which would make the chart above make a lot more sense.

So to me it means that you shouldn't look to gold to give you a fair value of house prices at this moment in time or vice-versa because it will give you either the illusion that gold is starting to become over-valued compared to property or that property is under-valued.

(I think gold will start to 'appear' to be over-valued against most things anyway at 2500-3000 but that's because fiat will be collapsing.)

Edit: Oops, this might be in the wrong section, sorry.

 

[rblong2us]

Yes
its too simplistic and as you say, always other variables that often get ignored at the time but get trotted out in time for the 'next war'

Nice to be in gold and on the sidelines in some ways but like you, I wonder when the UK property market will do what it should ......

I take it you are UK based, Unbeatable ?

 

[Unbeatable]

Hi rblong2us

Yes, I'm UK based.
Renting in London at the moment
But planning to move out to a market town > 70 miles from London in Feb next year, rent for a 6 months to get an idea of the area and then buy something more rural.

What about yourself?

 

[rblong2us]

Hey Unbeatable, London's a great place :doodoo:

My favourite view of it is in my rear view mirror :rotflmbo:

Its entirely possible that 'the market' in property, as with a lot of other 'important markets' will be artificially supported by devious bankster tricks.
They stare into the abyss if markets are allowed to do what they should do, so will do anything to avoid the void.

The emerging pattern seems to be that coinfidence is returning, certainly in the bottom half of the UK and people are happy to get rid of their money regardless of if it being earned, savings or credit.

The risk going forward, is the possibility of 'them' loosing control. This will have to be triggered by a genuine 'black swan' event as they are clearly able to plan for and manage predicted events. So it may not be so clever to sit back and wait for 'the inevitable' as it may not happen for many years and we should not put our lives on hold.

Being in control of your needs remains a fundamental requirement though.

I am based in the bottom half of England and have been in 'bunker mode' for the last 4 years ( since the money markets failed ) but am now motivated to consider an eco project with self sufficiency built in.
The alternative being to remain in bunker mode and wait ..........

Good luck with getting outa town

 

[Unbeatable]

Thanks

Yes I agree that confidence is returning but I still think there are historically low levels of supply also historically low interest rates & historically lenient repossession (foreclosure) rules in the UK.

As soon as these fundamentals change, higher unemployment, interest rates up, or just inflation on energy and food making mortgage payments unaffordable then I expect house prices will drop down to at least 4X average income if not 3.5X.


Even if everything works out great I don't think home prices can beat inflation in the next few years so Gold is still better IMO.