Thursday, July 28, 2011

Why renting a home makes more sense

Home ownership, the Canadian Dream—Barry Bradey lived it with gusto. Over the past decade, the health and finance entrepreneur owned three houses in the affluent Toronto suburb of Oakville, and watched each soar in value. But after a divorce and a business failure, he needed cash on hand. So last fall Bradey (who asked that we use a pseudonym) did some back-of-a-napkin math. The 3,500-square-foot house he wanted would cost about $850,000. Even with $400,000 down, the mortgage would cost him roughly $3,000 a month. Add property tax and maintenance and "that's $5,000 a month before you turn on the lights." Utilities, insurance and various amenities would be another grand. He also figured the downpayment came at an opportunity cost of about six per cent, equivalent to another $2,000 or so a month. He bounced these numbers off a local realtor friend; she thought the carrying cost should be closer to $12,000. Nevertheless, she insisted the house was worth the money because it was "an investment."

Bradey didn't buy that. To rent that same house would cost him—all in, and worry-free—about $3,500 a month. A 53-year-old father of two with a startup venture underway, Bradey did the financially prudent thing. He now rents a large townhouse in the same neighbourhood for $2,200 a month. "With a house, its market value might go up or down, but it would cost me $8,000 to live there," he says. "My logic is, renting gives me flexibility. I won't have to pay five per cent [commission] if I want to leave."

This is not yet another story about the real estate bubble. It's a story about why more of us don't do what Bradey did. The belief that we're not responsible adults until we own our home, whether or not we can afford it, has distorted and stigmatized the cheaper and safer alternative: renting. And we're literally paying the price.

Over the past decade, as the value of the average Canadian home doubled, and tripled in some areas, rents remained stable or even declined. As a result, it now costs more than twice as much to own that average home as it does to rent it. In May, Ben Rabidoux, an Ontario financial adviser (and an unapologetic renter) who runs the Economic Analyst blog, illustrated the unprecedented gap that's opened between the cost of renting and owning with a series of fever graphs charting rents and housing prices in seven cities across the country. The lines track more or less in sync until a decade ago, when they diverge as home prices shoot toward the stratosphere, the gap growing wider with each year, like huge jaws swallowing homeowners' retirement savings and vacation budgets and pushing them further into debt.

Even before the recent run-up, renting suffered under the perception it's money thrown away that could be put toward building equity—a myth the surging home values have transformed into a near religion. Fed by this belief, Canada's home ownership rate rose to eclipse most other rich nations', up almost 10 per cent since 2000. Today, two-thirds of households live in privately owned homes, rising to 70 per cent in Vancouver and 74 per cent in Calgary. In New York, Paris or San Francisco, that proportion is closer to a third. In fact, in much of Europe, lifelong renting is the socially respectable norm, backed by rent controls and tenant protection laws.

With widespread warnings that we're approaching the peak of the housing boom, with Canadians more indebted than ever, largely due to their outsize home investments, and with cities like Toronto boasting some of the lowest rents among major world centres, why aren't more of us re-examining the math? The reasons are cultural and emotional, backed by ill-conceived public policy. This Canadian Dream is an expensive delusion. There's never been a better time to rent.

Every asset class has standard ways to measure value. For stocks, there's the price-to-earnings ratio; for bonds, there are different yields. For real estate, the typical valuation ratios are price to income (what you can afford to buy) and price or buy to rent (what you could make in cash flow). According to Ed Sollbach, a Desjardins Securities strategist, the buy-rent ratio for the four biggest Canadian cities is currently above 2:1 —meaning it costs twice as much to buy as to rent the average home—and 3.1:1 in Vancouver. That ratio, it bears noting, only compares rent to mortgage costs; it doesn't include the various expenses entailed in home ownership—taxes, maintenance, insurance—that can more than double the monthly outlay.

It's long been established that, over the long term and after adjusting for inflation, housing produces almost no return on investment. The calculus looks even bleaker for people who don't hold on to their properties for long. And that's most of us. In Vancouver, for example, a recent survey found that half of new condo buyers expected to live in their units less than six years. When commission and closing costs, maintenance, moving and other expenses are added up, the sum can easily eclipse any equity amassed in that short time—even in a city with a skyrocketing condo market. What's more, in the first years of ownership, your mortgage payments are going primarily to paying interest on the loan. Renters and owners both "throw money away"; the former just toss it to landlords and the latter to bankers. Or as Rabidoux, who's writing a book about our housing obsession, puts it, "the majority of new homeowners are still renters; they've just gone from renting space to renting money."

While financial gains from home ownership are iffy at best, the opportunity cost is significant. When Alexandre Pestov, a strategic consultant and research associate at York University's Schulich School of Business, compared buying a two-bedroom Toronto condominium to renting it over the past 25 years, he found that the renter ended up $600,000 richer than the owner if he invested the spare cash in low-risk bonds. Several other studies have reached similar conclusions: renting while you conservatively invest your savings is financially smarter than buying a home.

"We have a very distorted picture right now," says Pestov, "because of the very low interest rates and the influx of speculative capital." While these factors have propelled the buying spree, they've also been great boons to renters. The condo boom, for example, owes a lot to "specuvestors" who rent their units before flipping them. Since they're looking to cash in on the price appreciation, as long as the rent covers their mortgage payments, they figure they're ahead. Cheap mortgages, combined with rent control laws in most large provinces (except Alberta), have meant that this new stockpile of condos has suppressed rental prices. "In Toronto, it's a big factor," says Vince Brescia, president of the Federation of Rental-housing Providers of Ontario (FRPO). "This is brand new product, so it's very competitive."

Rents were also hit by a drop in demand as most people who could scrape together a downpayment rushed to buy. For example, in Ontario between 1996 and 2006, and especially in the last decade, tenant households dropped by 84,000. "It's unprecedented," says Brescia. "You have to go back to the 1940s to find the last time tenant numbers declined." Facing sliding demand and a surging supply, landlords refrained from jacking up rents. As a result, the growth in rents in Ontario has not even kept pace with increases allowed by rent control laws.

This confluence of trends has made renting uncommonly affordable. In fact, recent studies by both the International Monetary Fund and the Organization of Economic Co-operation and Development concluded that Canadian renters get a better deal compared to their owner counterparts than renters in almost every other wealthy country.

Still, many people factor in an ownership premium—the amount they'd pay over and above the cost of renting for the freedom, stability and simple bragging rights of having their own place. But it doesn't take a new homeowner long to discover just how large that premium can be in money and time: the constant outlays on maintenance and repairs (at least one per cent of the purchase price per year, experts estimate, and as much as four per cent), the chores and DIY projects that eat up weekends, the pressure to keep up with the ever-gentrifying Joneses. In fact, studies find that homeowners are no happier than renters and have higher levels of stress, largely due to the financial burden and greater time constraints.

Your lifestyle suffers, your worries mount—and yet, no matter how much data you throw at people, there's an ingrained belief that being a homeowner signifies maturity and that renting connotes instability and transience. Moshe Milevsky, a finance professor at Schulich and one of Canada's best-known home-ownership skeptics, has long argued that for young people with limited means and unrealized career potential, stowing most of their wealth in a single illiquid asset is foolhardy. Today, he thinks just about anyone would be better off renting. "I really wish I could sell my house and rent. Immediately!" he says. "The market is so overvalued. I'd sell to the biggest sucker. But my wife and kids would kill me." That's because, for most of us, financial considerations are only part of the equation. "The decision to purchase a house goes well beyond the practical," says Milevsky. "It's part of people's identity."

This feeling is particularly pronounced in the cities that have seen the biggest migration to ownership. Take Vancouver: "There's always been a high home-ownerships rate here, but through this recent mania, the stigma on renting has grown more extreme," explains the Vancouver Real Estate Anecdote Archivist (VREAA), a blogger who's tracked the housing run-up since early 2008 (and whose unpopular opinions have led to a carefully guarded anonymity). "It's very [common] for renters to go to a barbecue and feel sheepish when they speak to the brother-in-law or colleagues. And if you claim online that you can afford to buy but choose not to, you're jeered as clearly lying."

While the average price of a Vancouver home is now more than 11 times the average family's income, the rental market has stayed earthbound. But VREAA notes that the bubble has raised the "social cost" of renting. "[It's] become broadly socially synonymous with being relatively impoverished and disenfranchised," he wrote in a post that drew passionate debate. One respondent noted that people are renting luxury units in new buildings they can barely afford to give the illusion they own. Another said that even though renting saves him and his wife $4,000 per month, in social terms, "we've never felt poorer."

Vancouver may be extreme, but the stigma is just as real elsewhere. Bradey, the new convert to renting in Oakville, knows that his friends, who are largely well-to-do and own their homes, see his move as a regression. "Even in my own mind, I probably downgraded [my social status] from an A+ to a B+," he says. Still, he believes that, were most people who may pity him now forced to go without income for three months, they'd be in trouble.

Canadians' attitudes about housing have long been shaped by government policies and the tax system. There is a large discrepancy in taxpayer subsidies for owners and tenants, according to a study released last fall by the FRPO and the Canadian Federation of Apartment Associations (CFAA). The average homeowner receives $1,823 a year through programs such as tax-free capital gains on the sale of principal residences and the Home Buyers Plan that lets first-time buyers withdraw money from their RRSPs for downpayment. Renters, meanwhile, get $308—even though, on average, they have half the income of owners. CFAA president John Dickie argues that this situations benefits neither taxpayers nor the economy. "The government should get out of the business of encouraging people to own," he says.

There's a broader economic case for encouraging more people to rent. Aside from consumers' dangerously high levels of debt, having so much money concentrated in housing makes the whole economy less efficient. In his 2010 manifesto Renting the Dream: Housing in America after the Great Reset, University of Toronto professor Richard Florida goes so far as to paint home ownership as a relic of a different time. "Owning your home made sense when people could hope to hold a job for most or all of their lives," he writes. "But in an economy that revolves around mobility and flexibility, a house that can't be sold becomes an economic trap," preventing people from moving to where the jobs are. Studies in both Europe and the U.S. corroborate this argument, showing linkages between high home ownership rates and unemployment.

In the glow of our pride of ownership, we tend to forget that owning your residence is hardly the global norm. Quebec, where home ownership rates have been rising, remains a renting-friendly society, at least in the urban centres, and Montrealers who move to Toronto are often shocked by the pressure they feel to buy. In Switzerland, Sweden and other parts of Europe, particularly where rental markets are highly regulated, the majority rents. In fact, Germany, Europe's economic engine, has the European Union's highest proportion of renters, according to London-based property research firm RICS. In Berlin, 90 per cent of residents rent; in Hamburg, the share is 80 per cent. And renters aren't the lower-income contingent: professionals who spend half their earnings on rent are not uncommon. While Germans do want to own, they don't feel pressed to buy when they can't afford to, the way Americans, Canadians and Britons do. The difference can be traced to real estate market trajectories: Over the past decade, while housing bubbles percolated through much of Europe and in North America, home values rose less than three per cent in Germany. Renting has no stigma because Germans don't think of home ownership as an investment opportunity of a lifetime.

European governments are also less in-clined toward home ownership boosterism. In parts of Europe where renters dominate, tax regulations don't favour owners, rents are tightly controlled, unlimited-length leases are common, and supply of attractive apartments is plentiful. As a result, notes Dickie of the CFAA, European renters don't move as often as North Americans.

The European attitude is in line with the broader social trend of consumers focusing more on services rather than assets. Ten years ago, American economist Jeremy Rifkin predicted the onset of "the age of access," where we'd pay to use things, not own them. We already see this in other sectors, from the rapid growth of car-sharing to tech tools being rented off the Internet cloud. Richard Florida, for one, advocates what he calls "plug-and-play" housing, where flexible rental arrangements of furnished and unfurnished residences with hotel-style amenities will serve the increasingly mobile workforce.

In the U.S., after the fiasco of George W. Bush's "ownership society," a shift in mentality has already started. Home ownership has experienced the biggest decline in two decades, and the number of renting households has been growing by about 700,000 a year since 2006. In New York, San Francisco and other thriving cities, brokers are reporting sharply rising demand for luxury rentals, as affluent people who could afford to own decide there's no cachet anymore in being a homeowner, and lots of risk. Indeed, in a recent poll, 71 per cent of Americans conceded that renting has advantages over buying.

"Renting has become culturally accepted in the U.S.," says Desjardins strategist Sollbach, who's tracking the market correction. Ironically, this shift is happening at a time when the plunging prices in some regions make buying advantageous. "But Americans have had such dramatic losses that the whole idea of owning has been drummed out of people's minds," he says. "They've gone through a life-death experience." The equity markets have taken notice: the values of American apartment REITs have risen 72 per cent since early 2010.

Even in Canada, real estate dropouts seem to be on the rise. In the past year, major cities have occasionally seen bidding wars—not for homes but for prime rentals, with choice units renting for higher than asking price. But a broader shift likely won't happen until some economic factors—most notably mortgage rates—change. We prefer owning—even though, at $366,000, the average Canadian home today costs more than twice as much as its U.S. equivalent; even though a small increase in the lending rates will push scores of over-leveraged homeowners into crisis; even though Bank of Canada governor Mark Carney is practically guaranteeing that those higher rates are coming. We're still buying; in May, house prices rose 8.6 per cent nationally, and a stunning 25.7 per cent in Vancouver.

No one argues that owning a home is, in principle, a bad idea. But today, in this market, renting is a better one. After 12 years of rising real estate, a renter goes against a powerful cultural tide. But even if the housing bubble continues to inflate for months or years to come, it's high time to recalculate the ownership premium we are willing to pay.

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McAlvany Weekly Commentary

Don’t Let Them Bully You! The Debt Ceiling is NOT the Issue

A Look At This Weeks Show:
-Debt ceiling arguments in Washington are merely a political game to distract us from the real structural issue (a 77 trillion dollar funding gap).
-Contrary to the propaganda, not raising the debt ceiling does not mandate a U.S. Debt default.
-A default by any other name is still a default and Greece DID default. Now what happens?

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Jim Rogers: Prepare for a lost decade or more

Jim Rogers :'s a charade it is a scam they are no going to do anything seriouse they are going to announce something either the day before the day of or the day after they are gonna say everything is OK but in 6 months from now a year from now America is going to be in worse shape than it is now they are going to continue to spend and drive us all deeper into debt we have been doing this for 40 years it is not going to go anywhere ....

There are 5 days until the default date of August 2nd. How will this affect everyday Americans? While Obama and Boehner play chicken Jim Rogers, co-founder of Quantum fund, sounds off on the economic issue. Is this a political charade . The politicians are too above of listening to the people. No fucking wonder! They are just way out of touch. Stocks are rallying on borrowed time. We are in a recovery on borrowed time. Jim Rogers is right.

The $1 Billion Armageddon Trade Placed Against The United States

Jack Barnes: Someone dropped a bomb on the bond market Thursday – a $1 billion Armageddon trade betting the United States will lose its AAA credit rating.

In one moment, an invisible trader placed a single trade that moved the most liquid debt market in the world.

The massive trade wasn’t placed in bonds themselves; it was placed in the futures market.

The trade was for block trades of 5,370 10-year Treasury futures executed at 124-03 and 3,100 Treasury bond futures executed at 125-01.

The value of the trade was about $850 million dollars. In simple terms, if that was a direct bond buy, no one would be talking about it.

However, with the use of futures, you have to have margin capacity behind the trade. That means with a single push of a button someone was willing to commit more than $1 billion of real capital to this trade with expectations of a 10-to-1 return ratio.

You only do this if you see an edge.

This means someone is confident that the United States is either going to default or is going to lose its AAA rating. That someone is willing to bet the proverbial farm that U.S. interest rates will be going up.

I believe what happened is a debt-ceiling deal was done in Washington and leaked to a major proprietary trader. Everyone knows the debt negotiations in Washington have been an extreme game of brinksmanship between political parties, but now someone knows how that game played out.

This had the hallmarks of one of the largest bond shops in the world knowing something the rest of the market didn’t.

The number of shops or even central banks that can take on this level of market risk is extremely small. Some that come to mind are hedge fund manager John Paulson, Bill Gross’s PIMCO, and the U.S. and Chinese central banks.

Paulson already scored big – about $6 billion big – on a similar trade years ago when he bet against subprime mortgages, the investments that helped bring down Lehman Bros. and many other investors.

Whoever was behind it wanted a trade on ASAP, and didn’t care about the ripples they would cause.

Armageddon trade

You can see how this trade caused fear to be unleashed in the market once it got out and the implications hit by looking at U.S. Treasuries. People who were long 30-year Treasuries panicked as they saw the huge short put on the futures market, and started to unwind their long exposure.

What you, as investors, should do now is look at the bond exchange-traded funds (ETFs) that provide a positive rate of return when U.S. Treasuries drop in value. Yields are going up sooner rather than later, if the person behind this Armageddon trade is correct.

MARC FABER: The Debt Fight Is Meaningless, As Governments March Toward Hyperinflation

Marc Faber expects a debt agreement, but nothing that helps in the long run. He tells King World News:

“Yes, I’m sure there will be an agreement, but it doesn’t solve the fundamental problem of excessive debt and of further, very substantial deficits. They’ll iron out something with lots of compromises and with spending cuts that are backloaded, in other words they won’t happen immediately. As we go along say in three or five years' time when these spending cuts should occur and when the tax increases should occur, nothing will happen in my opinion.”

America will keep piling on debt and printing money, as will Europe, leading to war and the collapse of governments:

"Well when the reset comes it will be, say, a hundred dollar bill will be exchanged for a one dollar bill or something like this. Before we have the Great Reset, the government, they will increase the war effort under whatever excuse that will be, but I think that is the likely course of action...The wealth destruction will be interesting because...the people that suffer the most before the reset happens are actually the cash holders."

As for gold:

...I just calculated if we take an average gold price of, say, around $350 in the 1980s and then we compare that to the average monetary base in the 1980s, and to the average US government debt in the 1980s...but if I compare this to the price of gold to these government debts and monetary base, then gold hasn’t gone up at all. It’s gone, actually, against these monetary aggregates, and against debt, it has actually gone down. So I could make the case that probably gold is today very inexpensive....

Listen to the full interview here

The Video Congress Does Not Want You To See

In the information overload that has become our every day, worrisome world, it is often difficult to see the forest for the trees.

This video may explain the hubris of constant political distractions keeping us from the truth. It is the bottom line of the Truth For Our Times:

View “The List” that we speak of in “The Video Congress Does Not Want You To See”.

Many have had the sneaking suspicion that our elected “leaders” in Congress are not going to Washington D.C. to represent us but for their own personal gain. This video may just validate that assessment!

Using the net worth data compiled by the non-partisan Center for Responsive Politics we found a disturbing trend.

The analysis of the information in this video has not been seen by anyone; not on Fox News and not on CNN. You have not read about this in the Wall Street Journal.

4 Quality Names To Keep An Eye On: BP, CF, COP, RIG, TRN

In today's market environment, risk levels have become elevated. Most equity investments today are fairly valued at best and will require a continued upward move in the market to compensate the investor for the risk incurred. While current valuations are not at nosebleed levels, they are not cheap either. This market dependence is not worth the risk incurred.

Develop Ideas
In moments like this, investors should devote their efforts to finding and developing ideas for the future. Stock prices won't go up forever and the longer they remain elevated, the more significant the pullback. When that occurs, the investor who is ready and armed with a quality watch list will be ready to take advantage of any short-term opportunities to buy at an attractive price.

Trinity Industries (NYSE:TRN) is one such name. Trinity is a diversified business that makes rail cars, barges, asphalt, and various other steel products for the infrastructure and transportation industries. Shares aren't cheap, changing hands at nearly 30 times earnings, and the company has around $2.6 billion in net debt. But revenues are growing and backlog continues to strengthen.

Patience Creates Opportunity
As one of the largest producers of ammonia for fertilizer use, CF Industries (NYSE:CF) is another one to watch. Shares are at $155, slightly below the high of $163. Shares are trading hands for 17-times earnings, but the company is expected to significantly grow profits over the next few years as the fundamental demand for fertilizer use looks solid. For what it's worth, shares trade for 10-times forward earnings based on future analyst estimates. If commodities continue to slip in the short term, CF is a name to keep a close eye on.

Shares in oil giant ConocoPhillips (NYSE:COP) already look cheap today. Shares have dipped to $72 from a high of $82 as the price of oil has also declined from its high this year. At current prices, COP trades for under 8.8-times earnings and yields a solid 3.5%. Further price declines could make the valuation look even better.

Shares of Transocean (NYSE:RIG), the largest provider of oil rigs, are still at depressed levels from the Gulf of Mexico oil spill over a year ago. The fundamental picture for RIG remains unchanged, however. Demand for its deepwater drilling rigs remains strong as major oil companies focus all major exploration efforts in deeper waters. Shares are trading at $62, down from $86 this year. Analysts see the company earning $4.01 a share this year and $6.17 next year. Even with the spill issue, if shares continue declining, the risk may be worth the value.

Bottom Line
Risk should always factor into any investment decision. Today's higher stock market valuations increase the level of risk assumed by investors. Keep an eye on today's quality company's for any future opportunity to investment at better prices. Price paid confers value received and risk assumed.

Housing’s Next Leg Down And QE3

That US home prices are once again trending down is no secret. But just how bad things are likely to get is not yet well understood. Consider this from the Atlantic’s Daniel Indiviglio:

Chart of the Day: The Housing Market Is Worse Than You Think
Has the state of the housing market gotten better or worse since the first quarter of 2009? To answer this, you have to define what you mean by the state of the housing market. If you mean sales alone, then the state of the market hasn’t changed much: existing home sales are up a little from that time, while new home sales are down a bit. But assessing the inventory of defaulted, unsold homes in the market probably provides a better measure of health.

The following chart created by Laurie Goodman, a housing market expert at Amherst Securities, shows the ominous rise of shadow foreclosure inventory. It was part of a slide in a presentation she recently gave at an event last week at the American Enterprise Institute on how the Dodd-Frank financial regulation bill is stifling mortgage credit.

This chart answers the question: what’s happening to the homes of all those defaulted borrowers that we hear about? Many of those properties are a part of so-called shadow inventory. This is the sort of limbo between when a home’s loan defaults and when the property is put on the market for purchase.

The increase shown above is staggering. The shaded area shows mortgages more than 12 months delinquent or in foreclosure (darker blue) and those seized by the bank (lighter blue). The sum has risen from just below 2 million in early 2009 to 3.35 million in April 2011. That’s an increase of more than 67.5% over this period of about two years.

Also interesting: despite accumulating more defaulted properties, banks are very careful not to increase the number of loans sold very much. Loans sold has been very steady from 80,000 to 95,000 over this period. So recently prices have begun declining again even though the inventory for homes available for sale is being kept relatively low compared to the number that should actually be available to buyers.

`According to Goodman’s presentation, even though homes sold are only about 90,000 per month, inventory is growing by around 60,000 per month. So the homes sold each month would have to increase by two-thirds just to keep up with the growing inventory — not to begin to cut the 3.35 million homes in the shadows. To conjure up enough demand to meet 150,000 sales instead of just 90,000, home prices would almost certainly have to fall faster.

Wow. Housing is heading back into a depression even though banks are keeping millions of foreclosed houses off the market. Bank auditors won’t let them hold these depreciating assets indefinitely, so in the coming year the trend will reverse, as banks are forced to clear out their real estate. That’s a ton of new listings at a time when even current listings aren’t selling. So unless something radical happens (a government subsidy aimed directly at housing, for instance), the next leg down in prices should be epic.

This will cause consumers to spend less as their main investment turns out to be an even bigger loser than they currently fear. So a housing crash becomes a broader recession.

To my knowledge no one has tried to calculate what kinds of losses banks are sitting on. So let’s speculate that the average foreclosed house is worth $20,000 less than its mortgage (a conservative guess since most California houses are underwater by way more than that). 3.5 million times $20,000 blows a $70 billion hole in bank balance sheets that will have to come to light sometime soon.

Since the government’s reason for existing these days is to feed the banks, losses of this magnitude will pretty much guarantee a response. If QE3 hasn’t already happened, this will bring it on.

Average U.S. House Price = One 100 Ounce Gold Bar - Nearing Low?


So is the U.S. housing market nearing its low? Priced against gold it just might be.

Falling hard as the gold price doubled and more since 2006, the average US home is now priced at 103 ounces of gold - little more than one gold bar for settlement of a 100-ounce Comex gold futures contract.

Housing has only been cheaper in 26 of the last 121 years, and is currently priced around half the long-run average of 201 ounces. But might there be further to go?

Unlike the fine content of a gold bar, necklace or tooth filling, no two residential properties are ever quite the same. Buying or selling the average home can only ever be notional, most especially in a nation of 313 million people, spread out between the shining seas.

But you get the idea, no doubt, as well as the point made on our chart above. Since the housing bust began, the average US home has lost over 70% of its value in gold. It's dropped nearly 80% since the gold-market found its own floor back in 2001.

All told, swapping gold bars for bricks - whether as investment or a place to live - hasn't looked this attractive since the inflationary depression of 1981. US housing's previous low came during the deflation of the Great Depression. Never mind that the average US home doubled in size inbetween, or swelled another 40% since. Because whichever flavor of depression we've got today, the immutable object of unchanging, unencumbered gold has once more whipped back to its pre-20th century value against the ever-changing, credit-reliant market of residential housing.

It's almost as if the "long boom" of easy credit never happened. At bottom, the average US home cost the equivalent of 71.5 ounces of gold in 1934. Forty-six years later, it fell just below 77 ounces of gold. Today's price tag of one Comex gold bar isn't thus rock-bottom yet. But compared to the top of a decade ago, it's getting there