Wednesday, November 08, 2006

Interesting Coincidence....

I was writing an email to an old friend today and noted that I sold my home in June of 2004 after "owning" for two years (really the bank owned it, but you get my drift).

When I sold, I thought RE was looking "toppy" and booked a 29.09% gain on my sale (not including commissions and transaction costs which obviously lowered the final take considerably)

The price of gold when I bought was 310/oz
The price of gold when I sold was 400/oz

That is a 29.03% gain.

So was the RE bubble created because of a chronic shortage of buildable land in the SF bay area, or something else? Well, given the national, if not global nature of the bubble, you already know my feeling.

The uncanny resemblance between the POG return and my home's return leaves us with the only explanation plausible, in my opinion....The run-up in prices since at least 2002 (probably earlier) was by credit expansion and incredibly loose monetary standards.

While continued inflation is possible, it is illusory.....the price gains are being eroded by a dollar decreasing in value....the only reason it isn't/wasn't more obvious is that anything that can be mfg'ed or serviced overseas was done in a great wage arbitrage leaving everyone wondering why gas was 2.50/gallon and microwaves at walmart were $99.

Home prices haven't gone up. Your dollar has gone down...Oh yeah, and some crappy plastic stuff at Walmart is pretty cheap too.

ciao for now,

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