patrick.net

Stocks should be the winner as they reflect human activity while gold and homes are passive subject to the economy and monetary/fiscal policies

smaulgld says

2. Rents should not be included for a primary residence

Again, you're not making sense. The price of homes is hugely affected by the investment value. As soon as we have laws forbidding owning a home for puroses other then residing in them, then this will make sense. Prices would be affected by such a law.

smaulgld says

Is the same point but a question arises have the smaller houses built in the 50s 60s grown at rates faster than their larger later built counterparts thus making up for their smaller size in price appreciation?

Yes because many were built in high demand areas (and are accordingly smaller). Also, the brick and mortar deterioration should lead to lower prices but does not. These old small houses killed over the past 30 years!

A primary residence by definition doesn't include rental income
The value of homes in the chart is based on average selling prices

Tim Aurora says

smaulgld says

2. Rents should not be included for a primary residence

Equivalent rents ( amount of rent the owner would pay to stay in his house) is a part of housing value.

And as such they are included in the price but there is no "dividend out put" if no actual rents are collected in a primary residence

Tim Aurora says

So , you compare a dividend paying asset with a non dividend paying asset. How convenient.

How the hell does a primary residence pay dividends? On the contrary, it charges maintenance. I agree the charts are wonky, but primary residence, gold, and silver all have something in common: they do not pay dividends. Real estate these days (in expensive areas) has become a commodity and subject to the whims of demand, artificial or real.

Tim Aurora says

smaulgld says

And as such they are included in the price but there is no "dividend out put" if no actual rents are collected in a primary residence

So , you compare a dividend paying asset with a non dividend paying asset. How convenient.

Bottom line is this graph is non starter, has too many issues and should not be looked for any answers.

Ok dont look at it for answers! It wasnt presented to answer questions.

Tim Aurora says

So , you compare a dividend paying asset with a non dividend paying asset. How convenient.

A primary residence is NOT a dividend paying asset- indeed you have to pay to keep it with maintenance and taxes.

The comparison is rough but they are both assets that produce no income.

If you want to compare housing and gold with income/dividends you would need to compare rental properties and mining stocks.

It takes as many ounces as the buyer and seller agree upon. I thought you knew that. Here you hold yourself out to be a money/numbers guy.

mmmarvel says

It takes as many ounces as the buyer and seller agree upon.

True but they use the spot price of gold to determine how many ounces they will deliver for the purchase or how many ounces they will have to sell for dollars to make the purchase

JH says

Tim Aurora says

So , you compare a dividend paying asset with a non dividend paying asset. How convenient.

How the hell does a primary residence pay dividends? On the contrary, it charges maintenance. I agree the charts are wonky, but primary residence, gold, and silver all have something in common: they do not pay dividends. Real estate these days (in expensive areas) has become a commodity and subject to the whims of demand, artificial or real.

What Tim is trying to point out is that no one will pay you money to rent your gold or silver, but they will pay you to rent your house.

For example, my neighbors left on a round the world sailing trip for a year and a half. Not wanting their primary residence to turn to shit while they are away, they found a couple to move in and pay (1) all maintenance (2) all taxes and (3) an extra $2,400 a month to them (effectively paying for their trip and then some).

Tim's point, even if you don't have to worry about items (1) and (2) for gold and silver, only primary residences can attain item (3) which has value which needs to somehow be accounted for.

CDon says

no one will pay you money to rent your gold or silver, but they will pay you to rent your house.

That is not true- gold leasing is very big business.
http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20141012000053&cid=1203

But that is besides the point.

You don't have to account for the lease value of homes or gold

The prices of gold and homes are subsumed in what ever value may be had in leasing.

CDon says

(3) which has value which needs to somehow be accounted for

For the occasional round the world trip? That is a bit dubious

JH says

CDon says

(3) which has value which needs to somehow be accounted for

For the occasional round the world trip? That is a bit dubious

Agree

It's really a non issue. There is nothing missing in the average price of a home that is purchased for the purpose of a primary residence-rent value does not need to be calculated.

The price of homes and the price of gold is a close enough comparison.

If you want to value rental properties you can then compare them to gold mining stocks.

JH says

For the occasional round the world trip? That is a bit dubious

It's like insisting that the gold lease value be included in the value per ounce of gold when it is already subsumed in the price.

Adding rent/leasing value just mucks up what is a pretty straight forward comparison of the average price of a home in ounces of gold

smaulgld says

That is not true- gold leasing is very big business.

Very interesting, I didn't know about that! I guess too you could say that gold or silver could be rented - a la the same way that diamond necklaces or what not are often rented to celebrities for various events (not practical but you get my point).

smaulgld says

The prices of gold and homes are subsumed in what ever value may be had in leasing.

This part I am not as sure about. Assume two identical twins buy gold on their 18th birthdays, and sell it on their 80th. One is a horder and sticks it in the wall, the other rents it over the course of the last 62 years. The guy who rented it out made 10X what the guy did who walled it up for a lifetime, yet their buying and selling price are the same.

CDon says

Very interesting, I didn't know about that! I guess too you could say that gold or silver could be rented - a la the same way that diamond necklaces or what not are often rented to celebrities for various events (not practical but you get my point).

Gold can also be leased via one's ownership in ETF's -the gold you have in there is leased all the time-one could argue the leasing actually REDUCES the value as it increases the supply of gold whereas Tim's point is leasing increases the value of a home.

CDon says

This part I am not as sure about. Assume two identical twins buy gold on their 18th birthdays, and sell it on their 80th. One is a horder and sticks it in the wall, the other rents it over the course of the last 62 years. The guy who rented it out made 10X what the guy did who walled it up for a lifetime, yet their buying and selling price are the same.

The chart was never meant to cover leasing/rental hypotheticals and I don't think it should

smaulgld says

he chart was never meant to cover leasing/rental hypotheticals and I don't think it should

Agreed. I think leasing a gold necklace to a celeb is not so much leasing gold commodity as leasing a value added item.

JH says

CDon says

(3) which has value which needs to somehow be accounted for

For the occasional round the world trip? That is a bit dubious

Ok, but there is another guy who works for the state department and has lived overseas on and off for the past 20+ years, renting his house out the entire time. Whats the value of that?

Both my examples are somewhat dubious but contain an important point. Unlike some commodities where the owners only realize the value upon sale, houses do have a certain dividend value which (per Tim's point) you can account for.

CDon says

Unlike some commodities where the owners only realize the value upon sale, houses do have a certain dividend value which (per Tim's point) you can account for.

If there is a dividend value its included in the sales price of the home. It's really no point at all

I would argue your state dept buddy is transferring his 'divedend' into rent overseas, making it a wash (unless per diem but could argue that is sort of deducted from salary). I definitely understand the point, and one could consider it advantageous compared with owning gold. but I'm not sure enough people do this to make the broad statements that homes pay dividends.

JH says

I definitely understand the point, and one could consider it advantageous compared with owning gold.

That's the only & very limited point I was trying to make. Thanks.

JH says

but I'm not sure enough people do this to make the broad statements that homes pay dividends.

Yes, "dividend" is a broad term which really doesn't totally describe this attribute that (for most people) houses have but gold does not. The guy that pays 500K for gold (and then rents) wont be in the same position of the guy that pays 500K for a house and then avoids rent, but yes, its not exactly correct to say its a dividend in the way most people think of that term.

Call it Crazy says

CDon says

very limited point

Very limited....

How about trying real world situations instead..

OK. 1.5 years ago, this guy was saying it was a terrible time to buy your house and instead extolling the virtues of buying silver in the intervening 2 years (idea being you could then buy when his expected housing crash was complete).

http://westsideremeltdown.blogspot.com/

Forgetting for a moment that housing has gone up and silver has gone down in the last 1.5 years, clearly the fact that he could have lived in his house but not in his silver has some value.

CDon says

Call it Crazy says

CDon says

very limited point

Very limited....

How about trying real world situations instead..

OK. 1.5 years ago, this guy was saying it was a terrible time to buy your house and instead extolling the virtues of buying silver in the intervening 2 years (idea being you could then buy when his expected housing crash was complete).

http://westsideremeltdown.blogspot.com/

Forgetting for a moment that housing has gone up and silver has gone down in the last 1.5 years, clearly the fact that he could have lived in his house but not in his silver has some value.

Without complicating the issue unnecessarily with the rent issue, the increased gold/silver ounces required to buy a house, bears out the fact that homes appreciated more than silver/gold such that more ounces were required to buy a home from 2011-2014.

The point is made without talking about assigning a value of the rental value of residential homes

smaulgld says

Without complicating the issue unnecessarily with the rent issue, the increased gold/silver ounces required to buy a house, bears out the fact that homes appreciated more than silver/gold such that more ounces were required to buy a home from 2011-2014.

The point is made without talking about assigning a value of the rental value of residential homes

Noted. It just so happens that CIC asked for a real world example that did include the rent issue so I provided one.