Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
The Euro Is Bidding Its Time: A Reversal at Hand? - 23rd May 19
Gold Demand Rose 7% in Q1 2019. A Launching Pad Higher for Gold? - 23rd May 19
Global Economic Tensions Translate Into Oil Price Volatility - 22nd May 19
The Coming Pension Crisis Is So Big That It’s a Problem for Everyone - 22nd May 19
Crude Oil, Hot Stocks, and Currencies – Markets III - 22nd May 19
The No.1 Energy Stock for 2019 - 22nd May 19
Brexit Party and Lib-Dems Pull Further Away from Labour and Tories in Latest Opinion Polls - 22nd May 19
The Deep State vs Donald Trump - US vs Them Part 2 - 21st May 19
Deep State & Financial Powers Worry about Alternative Currencies - 21st May 19
Gold’s Exciting Boredom - 21st May 19
Trade War Fears Again, Will Stocks Resume the Downtrend? - 21st May 19
Buffett Mistake Costs Him $4.3 Billion This Year—Here’s What Every Investor Can Learn from It - 21st May 19
Dow Stock Market Trend Forecast 2019 May Update - Video - 20th May 19
A Brief History of Financial Entropy - 20th May 19
Gold, MMT, Fiat Money Inflation In France - 20th May 19
WAR - Us versus Them Narrative - 20th May 19
US - Iran War Safe-haven Reasons to Own Gold - 20th May 19
How long does Google have to reference a website? - 20th May 19
Tory Leadership Contest - Will Michael Gove Stab Boris Johnson in the Back Again? - 19th May 19
Stock Market Counter-trend Rally - 19th May 19
Will Stock Market “Sell in May, Go Away” Lead to a Correction… or a Crash? - 19th May 19
US vs. Global Stocks Sector Rotation – What Next? Part 1 - 19th May 19
BrExit Party EarthQuake Could Win it 150 MP's at Next UK General Election! - 18th May 19
Dow Stock Market Trend Forecast 2019 May Update - 18th May 19
US Economy to Die a Traditional Death… Inflation Is Going to Move Higher - 18th May 19
Trump’s Trade War Is Good for These 3 Dividend Stocks - 18th May 19
GDX Gold Mining Stocks Fundamentals Update - 17th May 19
Stock Markets Rally Hard – Is The Volatility Move Over? - 17th May 19
The Use of Technical Analysis for Forex Traders - 17th May 19
Brexit Party Set to Storm EU Parliament Elections - Seats Forecast - 17th May 19
Is the Trade War a Catalyst for Gold? - 17th May 19
This Is a Recession Indicator No One Is Talking About—and It’s Flashing Red - 17th May 19
War! Good or Bad for Stocks? - 17th May 19
How Many Seats Will Brexit Party Win - EU Parliament Elections Forecast 2019 - 16th May 19
It’s Not Technology but the Fed That Is Taking Away Jobs - 16th May 19
Learn to Protect your Forex Trading Capital - 16th May 19
Gold Ratio Charts Offer The Keys to the Bull Market - 16th May 19
Is Someone Secretly Smashing the Stock Market at Night? - 16th May 19

Market Oracle FREE Newsletter

U.S. House Prices Analysis and Trend Forecast 2019 to 2021

Class Warfare in the U.S. House Price Gold Ratio

Commodities / Gold and Silver 2010 Mar 26, 2010 - 06:57 PM GMT

By: Adrian_Ash

Commodities

Best Financial Markets Analysis ArticleUpdating the big-picture charts of US housing priced in gold ounces...

HARD TO SAY what all the tax-payer cash thrown at US housing will do to home prices. Because at first glance, the $14 billion of aid (aka meddling) apportioned on Friday seems set to both inflate and depress prices.


Subsidizing over-priced contracts stops the market from clearing, and people whose homes are worth less than their mortgage can now seek government-backed loans to cover the difference. But that's only thanks to lenders writing down what they're owed – or rather, what the securitized bonds holding their debtors' mortgages are due at maturity – thus resetting the existing loan's value closer to current reality.

How close to reality, however, is another question.

One mortgage-bond investor, speaking to The Economist magazine, calls it "class warfare". Forced by the White House to forgive debtors a chunk of their debts, you can see the bondholder's point.

Still, at least the loans were priced only in Dollars. Valued in gold, today's loan modification or delinquency – let alone default – would be even harder to bear, as the chart of all US house prices above shows.

Twice peaking at pretty much 500 ounces of gold on the Case-Shiller data twice in the last forty years, the chart measures the average US home price, divided by the annual average ounce price of gold. Whether or not the low of 100 ounces gets hit again remains to be seen. But the steep plunge has flattened for now – and the way mortgage modification is running, the bottom in house prices could take a while to reach yet.

New units, for which BullionVault can crunch monthly data courtesy of the Census Bureau, certainly don't seem to have hit their gold price floor just yet.

Delaying the happy day of market-clearing prices still further is the second part of this week's new Obama housing rescue injection.

Bank of America jumped early on Wednesday, rather than waiting to be pushed by the White House. It voluntarily laid out a plan for debt jubilees worth up to 30% of initial loans. Which would kind of accept the 30% drop in national prices since 2006.

But trouble is, BoA wants to spread that write-down – taking loan values to current levels, remember, and only in a tiny handful of cases no doubt – across the next five years.

The bubble remains punctured, in short, and this sticking plaster can only slowed the rate of deflation. Sixty months is a long time for mortgage modification to catch up with today's prices. Not that it could ever work anyway – if "work" means stop the destruction of value, rather than letting the market fall as it wants to.

"It's pointless to rewrite these loans because they're underwater," said one economist, Sam Khater at First American CoreLogic in Virginia, to Bloomberg on Thursday.

"[Modifications] clearly aren't working...It's not a surprise."

New data from the Office of the Comptroller of the Currency says that over 57% of once-delinquent loans modified before end-2008 were delinquent again by end-2009. Overall in the US mortgage market, some 14% of home loans are a month or more behind with their payments. Some 1-in-4 loans are worth more than the home they're held against, too.

Deflation rolls on. Throwing money at it only destroys more money again.

By Adrian Ash
BullionVault.com

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2010

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules