New Home Sales at Record Low

Off Topic Politics & World Issues
21

[quote]Bill Roberts wrote:
Why precisely would the price of gold have more “truth” to it as a representation of value than the price of, say, titanium, steel, oil, copper, or wheat?

Or for that matter, fractional ownership of an index of companies?

(Other than citing that many people think so.)[/quote]

I will try to find and post the info, but actually I was just presenting it for entertainment value. In the end, so much related to the stock market is “relative”. But to answer your question specifically, I would guess simply because we were on the gold standard the last time we were in that price range, and to compare apples to apples you would have to convert back to compare. Also, we have never tended to use titanium, steel, oil or wheat (maybe copper) as a representative store of wealth.

22

I probably didn’t put it well, but what I was trying to say is that while I don’t doubt some authors have said the Dow has “really” hit $1500 when “correcting” for value of gold, there are underlying faulty assumptions behind that.

Yes, the relative valuation of the Dow to gold changed that much. But its relative valuation to countless other things changed by different amounts, most of them not nearly so drastic.

It’s easy to demonstrate that gold is not, in truth, the center around which all else revolves. If that were so, then prices of other commodities when put in terms of amounts of gold of equal value would be the stablest possible comparison.

Instead, when commodities are related to gold then their “valuation” is extremely unstable. I am not speaking of theory: I’m saying if you track prices of commodities – pick whichever ones you like – vs gold you will not find the valuation to be anything like stable, but rather far less stable than when valued relative to currencies such as the dollar, pound, or Euro.

What people USED to do says nothing really. It’s happy thought, but not reality. Thinking of things as being “really” worth such-and-such because “that’s what it’s worth in gold” is not particularly useful and cannot be shown to be.

None of this is against investing in gold if a person’s estimation is that gold’s valuation, relative to their currency or another asset of their choice, will be greater at a future date than presently: which really comes down to betting that other people are underestimating the future worth and that one is better skilled at such estimation than they are. And of course it has to be factored in that, unlike many other investments, gold produces no income.

23

What Bill wrote is precisely the reason why gold will skyrocket.

Right now, most people think of the dollar as ‘home base’. Gold is considered an ‘investment’ or speculation like with any other item.

As the dollar and all fiat currencies are destroyed, it will suddenly dawn on people that ‘home base’ should really be gold. Its not: “How much gold will my dollars buy?”, but rather “How many of those pieces of paper can I get for my money, for my gold?”

That is in effect the end of the bubble-omics and all the spending programs, where the debt ceiling gets raised by the trillions. When money can’t be stolen by inflation, all the grand plans of all the ‘Grand Panjandrums’ come crashing down.

Then one supreme law of the land I suggest is: If anyone EVER AGAIN suggests the use of fiat money or debt based money, they are to be hung within 24 hours. No exceptions, no exemptions.

24

[quote]JEATON wrote:

[quote]JoeGood wrote:
Okay I know you are a well known troll but assuming you actually believe this then you should be stupidly rich by the end of 2012, right? I mean if you short the DOW down to 1500 and ride gold futures up to $8,000 that could turn a small amount of money into a fortune.

So in 22 months you’re going to come on here and show us all the pics of your newly gained wealth, right?[/quote]

Although I think projecting long term outcomes in dynamic systems is akin to mental masturbation (fun in the moment, but kind of empty when your done), I think this statement assumes too much.
Even if you did believe the DOW could go down to 1500 in the next two to five years (very possible from a deflationary perspective) it is unlikely that one could profit from the fall after a certain point. Banks and brokerages would be failing so quickly at some point that the possibility of getting paid on your “bets” would be virtually zero. Also, if the gov made the ownership of gold illegal, as it has proven itself capable of, one would again find themselves “right” but as poor as ever.
Also, I have been dead on right about the eventually outcome of an event literally hundreds of times without getting the exact time frame correct. In the end I could say “I told you so”, but I could not show you the money.
A very short list:
Global Crossing
GM
Exodus
Enron
Fannie
Freddie
and many more.

Another thing that I will try to find and post just for kicks, if you take our March 2009 low in the DOW and adjust it in value to gold rather than dollars, we have already hit 1500.

[/quote]

Okay I agree that at some point you’d be unable to continue shorting the DOW because of basic systemic failure at that point. But you could absolutely short it a lot of the way down and make a killing. Of course if the DOW was falling like that I might be tempted to “short the US” by going into other currencies. But either way if I was certain about the fall, and certain about the time frame I would be hard pressed to not make a killing.

This is mostly about a few people who make “out there” staements as if they have some sort of divine inspiration but never quite have anything to back it up other than someone elses theory.

25

[i]Government statisticians have low confidence in the monthly report, which is subject to large revisions, and large sampling and other statistical errors.

In most months, the government isn’t sure whether sales rose or fell. The standard error in January for instance, was plus or minus 14%.
[/i]

I think there are three different things going on here. First is the above quote and second is basically what Bill said. Sales stimulated by government can never continue at one pace and have to drop to stabilize. The third reason is fundamentally the same as the second, but this time it was the first-time homebuyer’s credit that stimulated sales for most of last year. Homes sales usually drop in the fall and bottom out in the winter only to raise again in the spring. Between sales being artificially high earlier this year and the natural winter decrease, this decline really shouldn’t be much of a surprise, if it actually was a decline at all given the margin of error.

26

Oh, yeah, for you gold nuts… Forums - T Nation - The World's Trusted Community for Elite Fitness

Because I don’t think I can take two gold threads in the same week.

27

The crash will come soon, followed by the bail outs.

28

Hmmm…

I just signed the purchase agreement on a house, tomorrow is inspection and financing, closing at the end of March.

What do you all think of that?

29

[quote]SkyzykS wrote:
Hmmm…

I just signed the purchase agreement on a house, tomorrow is inspection and financing, closing at the end of March.

What do you all think of that?

[/quote]
I think if you like the house it was probably a good move. Sure, you may not have hit the exact bottom, but it’s impossible to time it perfectly. I think the general consensus is that we have basically bottomed out and may even be headed back up, despite what the sky is falling crowd around here may think.

30

If you’re buying the house because you like the prospect of living in it and particularly if you plan to do so for many years, and your cost in doing so strikes you as reasonable, then great.

Even if it so happens that houses will be on average selling for X% less two years from now or whenever,

  1. You wanted the house now
  2. Maybe the houses will be cheaper but the available interest rates might be a lot worse
  3. It’s a coin flip anyway: the current price represents the market’s collective best guess on value. It is not as if it is known that houses will be cheaper two years (for example) from now.
31

[quote]Bill Roberts wrote:
I probably didn’t put it well, but what I was trying to say is that while I don’t doubt some authors have said the Dow has “really” hit $1500 when “correcting” for value of gold, there are underlying faulty assumptions behind that.

Yes, the relative valuation of the Dow to gold changed that much. But its relative valuation to countless other things changed by different amounts, most of them not nearly so drastic.

It’s easy to demonstrate that gold is not, in truth, the center around which all else revolves. If that were so, then prices of other commodities when put in terms of amounts of gold of equal value would be the stablest possible comparison.

Instead, when commodities are related to gold then their “valuation” is extremely unstable. I am not speaking of theory: I’m saying if you track prices of commodities – pick whichever ones you like – vs gold you will not find the valuation to be anything like stable, but rather far less stable than when valued relative to currencies such as the dollar, pound, or Euro.

What people USED to do says nothing really. It’s happy thought, but not reality. Thinking of things as being “really” worth such-and-such because “that’s what it’s worth in gold” is not particularly useful and cannot be shown to be.

None of this is against investing in gold if a person’s estimation is that gold’s valuation, relative to their currency or another asset of their choice, will be greater at a future date than presently: which really comes down to betting that other people are underestimating the future worth and that one is better skilled at such estimation than they are. And of course it has to be factored in that, unlike many other investments, gold produces no income. [/quote]

Yes, I agree. Hence my “mental masturbation” comment in the earlier post.
I do think it important to highlight your previous comment, “Fundamentally it may well take population growth exceeding building of new homes to such an extent as to finally match up the number of people and families wanting homes to the number of homes.” This is very important. People can play musical chairs forever, but until population growth permanently removes a portion of the inventory, the problem will remain.

32

[quote]tedro wrote:

[quote]SkyzykS wrote:
Hmmm…

I just signed the purchase agreement on a house, tomorrow is inspection and financing, closing at the end of March.

What do you all think of that?

[/quote]
I think if you like the house it was probably a good move. Sure, you may not have hit the exact bottom, but it’s impossible to time it perfectly. I think the general consensus is that we have basically bottomed out and may even be headed back up, despite what the sky is falling crowd around here may think.[/quote]

I do like the place. I plan on being there at least 10 years, in which time I will be paying down the principal at a much higher rate than just the monthly payment plan.

The price/value on it is very good- 20K below its 2005 tax assessment, plus it is a good sized lot and modestly sized but custom built house (read: not a McMansion). The township in which it is located was dead set against the housing development boom, and has very strictly controlled new construction for the past 20 years.

The interest is looking like 5.25%. We will find out for sure tomorrow. It seems to be the fortunate product of patience and diligent hunting.

33

[quote]SkyzykS wrote:
Hmmm…

I just signed the purchase agreement on a house, tomorrow is inspection and financing, closing at the end of March.

What do you all think of that?

[/quote]

It would be a lot less in 2012. Only people with cash will be buying, as banks will be very unwilling to give anyone a mortgage.

A $200,000 house will be $40,000 by 2012.

34

[quote]Bill Roberts wrote:
If you’re buying the house because you like the prospect of living in it and particularly if you plan to do so for many years, and your cost in doing so strikes you as reasonable, then great.

[/quote]

He’s going to be making payments. Unless both of you are working and one of you is tenured, I’d not go near any deal now. Wait until there are food riots and armed squads of National Guards patrolling the streets, since cities and states are too broke to keep their cops. THEN, buy.

35

[quote]SkyzykS wrote:
Hmmm…

I just signed the purchase agreement on a house, tomorrow is inspection and financing, closing at the end of March.

What do you all think of that?

[/quote]

As long as you are doing this for a place to live you will be fine, just know that you will be able to get it a lot cheaper in a few years.

36

[quote]SkyzykS wrote:
Hmmm…

I just signed the purchase agreement on a house, tomorrow is inspection and financing, closing at the end of March.

What do you all think of that?

[/quote]

I think you should lock in your mortgage and wait for inflation.

37

[quote]orion wrote:

[quote]SkyzykS wrote:
Hmmm…

I just signed the purchase agreement on a house, tomorrow is inspection and financing, closing at the end of March.

What do you all think of that?

[/quote]

I think you should lock in your mortgage and wait for inflation.

[/quote]

It’s funny how all the gold nuts ignore this point, and want things both ways. If mass inflation really is coming, it only makes sense to put your money into items with a high utility that don’t tend to depreciate. With interest rates also being this low, it makes the decision even easier. No where else but with a home mortgage does the average person have the leverage to seriously hedge against inflation.

38

[quote]tedro wrote:

[quote]orion wrote:

[quote]SkyzykS wrote:
Hmmm…

I just signed the purchase agreement on a house, tomorrow is inspection and financing, closing at the end of March.

What do you all think of that?

[/quote]

I think you should lock in your mortgage and wait for inflation.

[/quote]

It’s funny how all the gold nuts ignore this point, and want things both ways. If mass inflation really is coming, it only makes sense to put your money into items with a high utility that don’t tend to depreciate. With interest rates also being this low, it makes the decision even easier. No where else but with a home mortgage does the average person have the leverage to seriously hedge against inflation.
[/quote]

Housing prices are still way to high, Housing I believe is one of the few areas where deflation will be felt, or at the very least it won’t keep up with inflation.

39

[quote]tedro wrote:

[quote]orion wrote:

[quote]SkyzykS wrote:
Hmmm…

I just signed the purchase agreement on a house, tomorrow is inspection and financing, closing at the end of March.

What do you all think of that?

[/quote]

I think you should lock in your mortgage and wait for inflation.

[/quote]

It’s funny how all the gold nuts ignore this point, and want things both ways. If mass inflation really is coming, it only makes sense to put your money into items with a high utility that don’t tend to depreciate. With interest rates also being this low, it makes the decision even easier. No where else but with a home mortgage does the average person have the leverage to seriously hedge against inflation.
[/quote]

Agreed.

If a person wants to buy a home and remain in it for many years, then interest rates are not going to go much lower but they certainly might go far higher. And particularly if one expects a high inflation rate, locking in a low interest rate mortgage is hardly a dumb thing to do. (Assuming that one has well justified confidence in being able to meet the payments.)

It is probably true that if interest rates greatly increase, home prices will drop further from their present value, simply because buyers don’t seem to evaluate so much on the sale price but rather on what their payments will be.

So if the intent on the other hand is to own a home for only a couple of years and then sell it, there could be major risk of loss on the resale.

40

On John S’s point:

Potentially an interesting way with some validity to it would be to do a study on home prices during past periods of high interest rates. I know of no easy way to do this, though it’s possible that indexes of some sort exist. But there has to be some way to make fairly equal comparisons in terms of square feet of the home, lot size, and neighborhood. And the dollar values would have to be corrected (imperfectly) with the CPI.

It may well be fair to say that in a following period, if there is one, of similarly high interest rates that property values per square foot in constant dollars may be no better than has been seen before.

If anyone does know of an index that can be used for this purpose, it would be great if that information could be posted.