Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

What Skyrocketing US Home Prices Say About Inflation

Housing-Market / US Housing Apr 16, 2021 - 09:22 AM GMT

By: MoneyMetals

Housing-Market

Anyone who says inflation isn’t a problem hasn’t tried shopping for a new home recently.

Housing costs are skyrocketing. The median sales price of existing homes has spiked 16% over the past 12 months (from $270,400 to $313,000) – the fastest pace in 15 years.

The real estate market is being pressured not only by a low inventories of houses listed for sale, but also by rising prices for construction materials.

Home builders must deal with a massive 200% increase in lumber costs since the onset of the COVID-19 pandemic. According to the National Association of Home Builders, lumber’s elevated price adds about $24,000 to the final quote on a typical new single-family home.



Meanwhile, steel, copper, cement, and other basic materials aren’t getting any cheaper. Copper ran up to a multi-year high earlier this year, and mining analysts warn of supply shortfalls in the months ahead.

Fed’s Powell Wants to See Inflation Move Up ‘For Some Time’

Federal Reserve Chairman Jerome Powell dismisses these inflationary pressures as transitory. He actually wants to see consumer and producer price rises sustained over a longer period.

Powell said in an interview that aired Sunday on 60 Minutes, “We want to see inflation move up to 2%. And we mean that on a sustainable basis. We don't mean just tap the base once. But then we'd also like to see it on track to move moderately above 2% for some time.”

Of course, the federal government’s inflation readings notoriously understate true inflation. But parts of the economy are already grappling with costs running well above 2% even when using the official numbers.

However, the Fed's inflation gauge – riddled with questionable weightings and various adjustments – currently shows broad prices levels rising by less than 2% annually.

By the time central bankers recognize inflation is running significantly above 2%, they will likely be way behind the curve when it comes to a policy response.

Inflation isn’t an equal opportunity offender. In any given year, it can rear its ugly head intensely in some sectors while leaving others relatively unscathed.

That makes attaining inflation protection a tricky proposition for investors. Diversification can be key to making a portfolio resilient to rising price levels in the economy.

Precious Metals vs. Real Estate

Owning tangible assets including real estate can certainly help investors weather an inflationary storm. But banking heavily on home price appreciation can also be risky – as all too many homeowners found out during the great financial crisis of 2008.

Even during boom times, a home can turn into a money pit.

Paint fades. Pipes corrode. Windows leak. Kitchens become outdated. Virtually everything that makes up a home’s finishes, from the flooring to the roofing, needs to be repaired or replaced (sometimes multiple times) over the course of its life.

Add to that financing and closing costs (mortgage interest and fees) plus property taxes, insurance payments, and homeowner’s association expenses (which can rise with inflation), and a home’s nominal price appreciation over time can easily be eaten away by all the associated ownership costs.

By comparison, the costs of acquiring and owning physical precious metals are minimal.

An ounce of gold never corrodes or requires any upkeep. It doesn’t trigger annual property taxes or other fees to third parties (except perhaps a small storage fee if held in a secure vault).

Precious metals are fungible and trade in liquid markets based on globally recognized spot prices.

Buying and selling is quick and easy.

Prices for most ordinary bullion products range within modest premiums over spot and can be sold back to dealers similarly close to spot based on prevailing bid/ask spreads.

A house is individually unique, with its value dependent on factors particular to its features, condition, and location.

A home listed for sale will remain on the market until a willing buyer is found – typically through a real estate agent (who takes a sizeable commission, of course).

Investors who have too much of their wealth tied up in real estate can find themselves stuck and unable to cash out when the market turns down or a need for liquidity suddenly arises.

In the event of a currency crisis, owning sound money itself – gold and silver – is the surest means of preserving wealth.

Although not guaranteed to be the best performing asset class over any particular economic cycle, history suggests that precious metals gain real value whenever inflation trends upward (as was the case in the late 1970s).

In an inflationary melt-up, gold and silver price advances can enable hard money investors increase their purchasing power when measured against most other assets – real estate included.

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2021 Stefan Gleason - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 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