Real Estate Price Adjusted by Gold Ratio

[David Song]

This graph shows the real estate price adjusted by gold, from 1889 to 2021. As we are seeing a record increase in housing prices this year, the gold adjusted housing price actually is very low, at a historically low level.

The minimum was reached in 2011, and from 2011 to now, there was not much increase. 

Does this mean that the nominal housing price increase we are seeing in recent years is merely a reflection of inflation?

Shall we still buy into this market?

[Alex Forest]

@David Song Interesting plot. I dont know, but wonder if you have ideas :)

Is it as relevant now, with the decoupling of the currency from gold decades ago? The graph may speak more to fluctuation of the gold to USD conversion rate, with housing mixed in. This graph below is real prices including inflation (as opposed to nominal)

It seems without the attachment to gold, everything is relative. Housing prices depend on a number of factors, including inventory, but also the ability of folks to pay...on purchasing power and incomes to service housing loans and rents. This relationship of price to rent Ive always found interesting. It says something about long term baseline housing costs for homeowners and renters.