It has long been said that a house in an "investment". Let's test this statement by measuring a house that I am familiar with in a very strong real estate market with by its value in gold rather than nominal dollars (Canadian dollars in this example).
As we can see from the chart, this particular market has increased rapidly recently and then flattened out over the past 2 years.
When measuring the value of this piece of real estate in gold a different picture emerges.
The value in gold stayed relatively constant in the first three years and has since plunged, even though nominal prices have changed little.
By having fiat dollars tied up in this particular piece of real estate, this "investor" homeowner, has lost the equivalent of 84 ounces of gold in a 6 year period, equal to $105,000 despite an increase in value in Canadian dollar terms!
The bad news for this home owner, is this real estate market appears due for correction in nominal terms which will surely decrease the house value in gold terms even further.
Under these conditions, it becomes apparent that renting may be more desirable than home ownership.
The value in gold stayed relatively constant in the first three years and has since plunged, even though nominal prices have changed little.
By having fiat dollars tied up in this particular piece of real estate, this "investor" homeowner, has lost the equivalent of 84 ounces of gold in a 6 year period, equal to $105,000 despite an increase in value in Canadian dollar terms!
The bad news for this home owner, is this real estate market appears due for correction in nominal terms which will surely decrease the house value in gold terms even further.
Under these conditions, it becomes apparent that renting may be more desirable than home ownership.
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