bostonbubble.com

[showgunx]

buying gold or buying home, timing is everything. If I need to pick one over the other today, I will support JCK's view and pick house.
My logic is simple, house market just went through a crash; Gold has been up and up for a very long time, so gold has more room to crash down with, if the interest rate ever goes up to a point to cause drop in both housing and gold.
Also housing price in gold's term seems ok today. following article explains it.


http://seekingalpha.com/article/294971-gold-vs-housing-a-contrarian-view-of-value

[Renter]

showgunx,

The Federal Reserve has pushed interest rates down by 1.5 percent or has lowered the cost of borrowing by 20 percent. Meanwhile, home buyers have taken the opportunity to bid up home prices by 20% based on their focus on the 'Monthly payment".

Meanwhile, the Real Estate inventory is at all time lows - to state that todays prices in real estate are a sign of a healthy RE Market is an indication that you haven't read enough.

Meanwhile, the author of "Gold vs Housing" made an accurate call in predicting the pullback in the Price of gold over the last year. Keep in mind that Spain and Italy have been in the midst of major banking challenges and money has been flowing into US Dollars during the last year.

Strong Dollar = Weaker Gold = as more people around the Globe have been buying dollars the price of the dollar goes up ( dollars then buy more Gold).

The rise in the US Dollar is a big problem for US fortune 500 and 1000. This leads to financial pressure on large companies which leads to less hiring and more layoffs.

At some point the Federal Reserve will do its magic to reduce the value of a dollar and the dollar will start to buy less gold.

With that said there are areas in the USA where Real Estate is cheap-cheap-cheap. Boston does not fall into that category.

Curious - showgunx were you bullish on Real Estate 2004-2006?

Best Regards

[mpr]

[Guest]

mpr,

"You must be one of the people they aim at with those oil futures radio adds which explain that you'll make money because the price of heating oil goes up during the winte........You don't have to be bullish on housing, but at least a house is a productive asset. Gold isn't. In fact you have to pay for storage, at least indirectly"

Comparing oil futures and Gold - are you a Realtor? Do you know anyone struggling to keep their job or to find a new one in this economy?

Gold is a store of value - stocks can also be a better store of value than a home. A house bought at the right time, when the buyer has very secure employment (will never have to move), can be a very productive asset. But, a house has lots of recurring carrying costs that can put a family in a real bind if they lose a job. You are giving me the same talking points of a friend who bought in 2006 and is now $100,000 down , or a friend who found them selves in early stage foreclosure when their business failed, or another friend who wants to buy today- but, who has insufficient liquid cash should they need a roof repair.

A home is bought with borrowed money - as a result buying a home is a leveraged investment. People have come to believe that there is minimal risk in the leverage asset purchase called a home. People can see the risk until they find them selves out of work or with a business failure.

Society has taught us that Gold is risky and a Real Estate (especially, when we call it a home) is not risky. Meanwhile, there have been very nasty crashes in Real Estate through history and lots of people hold their home through these down periods and some families are destroyed by Real Estate crashes.......

Best Regards.

[The othe guest]

[showgunx]

[Renter]

showgunx

Sounds like you found a nice home.

buying now or later is completely a personal choice and we are choosing to remain bitter renters a wee bit longer.

There is no right decision - what I struggle with is folks who are buying now who may find themselves under water when interest rates shot up (if they ever do). I have a friend shopping for their first home and I know they don't have the cash to bail themselves out if they were force to move for work and the Real Estate market was down. Buying is best when you can stay there for a really long-long long time and you have plenty of financial resources for the problems that arise.

The Real Estate mantra is you can always rent it out - there are lots of costs with being a land lord - you have to collect the rent - and you need to find stable long term tenants - it isn't necessarily easy.

Best Regards.

[mpr]

[Renter]

mpr,

Point taken ...

But, I think you've view of Gold is based on mis-information and I made the same mistake until 2009. I just couldn't get it through my thick head why Gold was a store of value/ a currency.

Saving in Gold is a mistake when interest rates are allowed to float at their natural rate and when they do a Saver is compensated for storing their saving in Dollars by some pretty good growth.

For example, when you can get 5% for your savings at your local bank - then your Money doubles in approximately 12+ years. You are being compensated for the inflating Money Supply - and you saving will buy the Same amount of food/gas in 12 years as it does today.

Today, our the Federal Reserve is keeping the Interest rate a unheard of low rates. As a result the purchasing power of your savings is eroding and over 10-12 years your savings will buy less.

Gold is a proxy for Oil/Energy and things you consume. Gold goes up in value when Central Banks keep interest rates at ultra low levels - because the Money supply is still expanding, you the saver is not being properly compensated for your savings, and the amount of Gold on earth stays relatively constant (the increasing number of dollars causes Gold to rise in value). Oil is required to extract Gold from the earth - so, the price of Gold today represents a portion of the cost to extract /process gold today.

So I agree , there are times when a high Interest rate is available to savers and that is when Gold is a speculative investment - when Interest rates are at 1% Gold is a sound investment for some portion of your nest egg.

Sadly, people are made to feel like they understand Mutual Funds and that makes Mutual Funds feel Safe. Similarly, Money Markets feel like a safe investment until there is a problem. I attempted to convince a friend in 2008 that the Reserve Money Market Fund was risky - he told me Money Markets aren't risky - then he couldn't get his Money one day.......risk for many is a perception with no basis in fact.

Best Regards.

[showgunx]

Renter,
I was disagreeing with your bull view of buying gold 6 months ago, and pick favior of house over gold back then. Now situation has changed. With the recent small crash of gold price, and the statement from goldman sachs saying gold price will stablized, I put some money in to GLD ETF. Let's see how I am doing in a few months

[Landlord1]

don;t like homes going up in price
cos the city will raise taxes again

in 2006 highs i was priced out but not it has gotten even worst since 2013.
the economy has not improved since 2006 yet homes have still gone up

[Renter]

showgunz,

Well done by you on waiting for a pull back - If been buying into the pullback.
Of course , this recent pull back will convince the masses that Gold is a risky investment and not safe to invest in.........which is true when you have a short time horizon .......in a longer time horizon low interest rates means your dollars saved in the Bank will buy less and less and less......

It sounds like Real Estate is booming in Boston area - think there is likely to be a little pullback or will the Fed continue to drive prices higher??

Regards

[showgunx]

Renter,
First let's talk about gold.
Gold is risky only because Goldman Sachs made it. I think the recent crash is Sachs taxing all the current gold holders just because it cans. It will happen again sooner than you think. It is just ironic that even all the big medias are pumping out BS saying gold is risky and overpriced after it crash below $1400 per OZ, yet people in Asia (China, Japan, India mainly) are buying gold like crazy. The cost to dig out 1 OZ of gold is between $800 to $1000 USD currently, that's why those mine companies' stocks are not doing well recently, the cost is too high!! So if gold price go down below 1000 dollars per OZ ever, I will allocate 50% to 70% of my investment portfolio to gold. I am currently in 13%.

now for housing in Boston
Yes, I agree boston’s home price is retardedly high, but I rather believe the Fed’s policy will continue to drive here’s price higher. Why? Because I can't think of a reason why the Fed would kill the current housing market upward trend. Fed doesn't care about inflation eating up average Joe's hard earned money, Fed doesn't care about the degrade of living standard for the coming generation, it's short term goal is to care about how to cover up the shit holes those 'too big to fail' dig for the past 10 years, its long term goal is to care about how to dilute the debt US owes the world. Cheapen the US dollar and pumping up housing price is considered the silver bullet. I am afraid the Fed would continue its current course of push the interest rate downward, until a better solution is found, or until the system couldn't take it no more and crash.
In Summary, invest in gold or house, either way is just voting no confidence to US dollar. The only difference is, US government and the Fed want the housing price to go up, because the benefit of increasing tax and restoring confidence. But they are not necessary want the gold price to go up, as higher gold price shaken the prime position of US dollar, as the international trade and reserve currency. So my educated guess will be gold price will be much more Volatile compare to housing price, while both will go upward in the near future.

[Renter]

Showgunz,

Well stated analysis. I wish my family was in a spot where we could live forever - but, sadly that is currently not our lot - so - I must invest in Gold.

I think we are in complete agreement - its amazing that the average Joe thinks Housing inflation is good - if Milk had a 5-10 year shelf life perhaps rising Milk prices would feel as good as rising housing costs.

Do think you may get a to buy Gold at $1000-$1200 in the short term or another pull back after a price rise?

Best Regards.

[showgunx]