From the tulip bubble in the Dutch Republic in the 1600’s to the South Seas bubble in the Great Britain in the 1700’s to the Dot.com mania in 2000, history is littered with bubbles. They have one thing in common – they always pop.
If you or anyone you know has been house-hunting lately, you are well aware of the “tight inventory” situation. There’s more buyers than there are houses right now, and that is pushing home prices higher.
While investors often get sidelined by vacations, lazy weekends at the beach, and spending time with friends and family during the summer months, there are underlying economic developments that bear watching.
Developments in the U.S. housing market have some economists hearkening back to the housing bubble that occurred about a decade ago. Within the new home arena, the impact is startling. The Fed’s still ultra-low interest rate policy, combined with the relative lack of supply have sent new home prices soaring.
The median new home price has skyrocketed 16.8% over the last year to $345,800, which is an all-time record high.
“Housing inflation is back, big time,” says Chris Rupkey, Chief Financial Economist at MUFG Union Bank, N.A. “This home price appreciation is certainly as rapid as it was during the housing bubble years and just as worrisome. The collapse of housing prices helped make the Great Recession great so we hope the Fed knows what it is doing,” Rupkey warned.
“Home prices are on fire with a new bubble in the making,” Rupkey warned. “Home price inflation isn’t going to stop either until the Fed starts moving up interest rates at a faster pace. The Fed says it cannot move up interest rates more quickly because ‘the natural rate of interest’ remains low, still encountering headwinds from the recession, but there is nothing natural about the rate of home price appreciation. It’s outasight.”
Moving to the high end of the real estate arena, the ultra-wealthy have been snapping up New York City condos like hotcakes. Another market commentator warned that a real estate bubble is in the works pointing to these examples in the high-end luxury market in Manhattan:
In 2014, the first New York City condo was sold for more than $100 million at One 57.
The cost was reportedly, $9,136 per square foot in 2014. Last year, however, in 2016, a swanky 16-bedroom penthouse at 220 Central Park was listed for $250 million. A deal or a bubble?
Before the next housing bubble in the U.S. has negative spillover impact on the broader economy and the U.S. stock market, take the time to properly diversify your portfolio and protect your assets with gold and silver.
Market Update: Gold Sees Modest Weekly Gain, Buyers Emerge On Dip
Gold prices closed slightly higher on a weekly basis on Friday. Buyers once again emerged as gold dipped toward the $1,242.00 an ounce level mid-week. Investors continue to wait in the wings and are buying gold and silver on price retreats.
The trend remains bullish for gold and other precious metals. Although the summer doldrums has seen quieter activity, gold is nearly matching the stock market’s gains year-to-date. Gold is up 8.32% through late June, versus the S&P 500’s gains of 8.91%.
For historical reference, gold investors may be interested to know that the price of gold climbed from $451 an ounce in 2004 to over $1,900 an ounce in 2011. Current prices in gold around $1,240 an ounce offer extremely attractive buying opportunities relative to the all-time high.