We rent a small 4-bedroom/2-bath house in Napa for $1400. Its a good deal, but it is very small (one of the bedrooms is little more than a very small “study”) and old. Nothing fancy or recently renovated.
Nice sized back yard though, decent neighboorhood. All the other houses on the street have been fixed up very nicely and many have sold in the last couple of years. One near us was on the market for $560 – didn’t ask if he got his asking price, but it went fast. He said they were surprised it sold so fast with the market being so slow, but he’s done a lot of work on the backyard and in the house.
This house would sell for much less – I’m totally guessing, but think it might go for around $500K, which puts our GRM at about 357.
BTW: it is interesting that the GRMs were in the 120-150 range in the 90s, but I expect this housing bust to cause a nasty economic downturn. What were the GRMs in the (short) early nineties recession in So. Cal.? Better yet, what were the GRMs in the 70s? Also, don’t forget – when markets fall from a great over-priced height, they *always* overshoot to below the long-term trend-line before going back to it. Between overshooting to the downside and the effects of a recession, some in the most over-priced areas may feel lucky if they only get a 50% haircut.
Someone I have been following who did very well in the early part of the gold bull market and always has good insights is Paul van Eeden. You can read about him and browse his past, free commentaries at paulvaneeden.com.
Here is an excerpt from a recent commentary:
Why the gold rally will continue
April 2, 2006
Thursday was an interesting day: the US dollar fell sharply against the euro and other European currencies, causing a spike in the gold price. Silver and other metals prices also benefited. US bonds fell, US stocks fell, US interest rate rose and the gold price increased. There it was: the dollar falling with rising interest rates and a rising gold price. Regular readers of these commentaries know we were waiting for this exact scenario. Under these conditions, I expect the gold price to continue to move upwards; even though it never does so in one, smooth, straight line.
The dollar is dropping dramatically. It will bounce soon – it may already be starting a bounce – which will cause a pullback in gold, but it is on its way down hard, so gold and oil will continue to go up.
Obviously the relative value of the USD to the other major world currencies isn’t the only factor effecting the price of gold, but it is definitely one of the biggest over the long term.
