Gold now fetches nearly $1400 an ounce.
I remember the last time gold was this high in real terms. It was the late 1970s and inflation was running rampant under Jimmy Carter. I remember a lot of books and talk about the end of the world as we knew it. Inflation was supposed to go and on.
Well, over the last 30 years, real estate has proved to be a better investment than gold.
Not counting transaction fees and holding costs, if you bought an ounce of gold in 1980 and held it until October, you would be ahead 95.5%, the economist figures. But if you adjust for inflation, you would have lost almost one-third of your investment.
“The value of gold in the last 30 years did not even keep up with inflation,” he said.
But if you had purchased a median-priced home in January 1980 and sold it for the median price in October 2010, Jones said, you would have notched a 252% gain, again assuming no transaction fees or holding costs. This is despite a 23% decline in values since 2006, he pointed out.
“And unlike gold, you would have been able to live in the property, reap the tax deductions for mortgage interest and property taxes, and [realize] a nontaxable gain of up to $500,000 when the house was sold,” Jones said.
Even after adjusting for inflation, housing values are still 18.6% to the good over the 30-year period, he said.