The link is to a CNBC video clip of an analyst discussing a rather odd (crazy?) theory I’ve never heard before. Namely, that RE prices remain relative to commodity prices and that per this “theory” housing is 25% undervalued.
Didn’t we have a thread on this subject before? Some analyst was comparing real estate to stocks and other volatile asset classes.
The flaw in the theory is that RE purchases are not always considered primarily in terms of building wealth and it doesn’t always compete head-to-head with other investment vehicles. Sometimes a house is just a house.
Well, we naively measure house prices in dollars only. Smart people measure prices in real dollars (i.e., inflation-adjusted), which is much better.
But since the dollar has lost so much value relative to gold, the Euro, oil, etc., you would be surprised to see how much California housing prices have changed from 1998 to 2005 if you were to measure them in gold oz., or in oil barrels, etc.
I agree with Bugs that this is not as straightfoward as it sounds, because many of these metals/commodities are highly volatile.
I am astonished that economists like that are that delusional when it comes to home prices vs. incomes. I suppose there are always dissenters whatever the reality.
Tell the people losing their homes at record levels now is a good time to buy.
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