His main point is that, for the past 30 years, the price of housing has generally been correlated with the prices of commodities (think oil, copper, lead, gold, pork bellies, etc.). In particular, over this time, the ratio of housing prices to an index of precious metals remains fairly constant. At present, the ratio is out of whack– precious metals have been increasing in price faster than housing– and he concludes that housing is underpriced.
I wouldn’t worry too much about his arguments. I think that much of the increase in precious metal prices over the last few years has been due to demand from overseas. Think of how much copper and silver China and India have been using.
However, I think that it is fair to say that there hasn’t been a similar demand from overseas for U.S. real estate. Hence his index is out of whack.
