HOMES IN AMERICA26,27
As shown in Exhibit 5.5, the average U.S. home prices in terms of the U.S.
dollar kept rising and have either stabilized, as they did in the early 1980s,
declined slightly, as in the early 1990s, or declined significantly, as hap-
pened starting in 2006 to 2009.
Looking at this chart in 2005, one can quickly reach the erroneous con-
clusion that home prices in America must keep on rising. However, in terms
of gold^28 (how many ounces of gold are needed to buy an average priced
home), Exhibit 5.6 shows the true fluctuation in house prices.
The chart shows that prices are more stable when expressed in terms of
gold. The chart shows the average house price fluctuating between 200 and
400 ounces of gold. Whenever the price penetrates the lower level of the
envelope, it signals that homes are underpriced; this can be considered a
good indicator for investing in homes. If the price penetrates the upper
boundary of the envelope, it has signaled over the years that homes are
entering a price bubble, and we should be careful in our investments as well
as in our financing decisions for homes. The chart also shows that houses in
the United States began getting pricy around the late 1990s and peaked in
EXHIBIT 5.5 Average U.S. home prices.
Money and Its Creation 111