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Real Estate: GOLDen Opportunity of This Decade

Everyone wants to comment on the current real estate market. They want to talk about how now is not the time to buy a home. Some even argue owning a house has never been a great investment. Most say it will be a long time before real estate again begins to appreciate. It all sounds so familiar to me. It was just a decade ago that many made the same arguments about gold as an investment.

Gold had dropped from over $400 an ounce to $250 an ounce (a 40% decline) from February 1996 to August 1999. People ran from gold as though it was a plague.

Lord William Rees-Mogg, the current Chairman of The Zurich Club, in 1997 said:

“No investment has been so thoroughly exploded as gold; most people think that there will no more be another gold boom than there will be another boom in tulip futures in The Netherlands.”

Two years later in 1999, Don Wolanchuk author of the Wolanchuk Report explained:

“Everybody hates gold. You can’t have a bottom until everybody is out. And everybody is out of the gold sector.”

Everyone knows what happened next. The proclamation of gold’s death was rather premature. Gold rose from $250 an ounce to over $1,400 an ounce in the next twelve years. I see the same situation with real estate today. I am not predicting that real estate will see the same levels of appreciation. I do believe however that the market will rebound strongly.

Those who continued to believe in gold as an investment were rewarded. Those who continue to believe in real estate as a sound investment will also be rewarded.

Here is what Adam Hamilton wrote in October 2000 in an essay titled Is Gold Dead?

The road for gold investors has been long and parched in the last five years.  They have wandered through a seemingly endless desert, occasionally tempted by what proves to be an illusory mirage.  Many have fallen beside the sun-cracked path, their white bones picked clean by buzzards and gleaming in the sun.  Nevertheless, a brave contrarian core continues to march forward.  They have studied history, currency, gold, investments, economics, and finance.  They understand the timeless value of gold, the cyclical nature of the markets, and the vagaries of human psychology.  They realize it is darkest before the dawn, and the journey most difficult right before the homestretch is reached.  Gold is in an INCREDIBLE position, and it will have its day.  Nothing goes up in price forever, and nothing goes down in price forever.  Investments are cyclical.  Gold is NOT dead, it is simply biding its time, waiting for its next earth-shattering mega-rally.  The spoils that go to the few remaining gold investors when that day inevitably arrives will be fantastic.  The stunning victory will quickly blot out the painful memories of the long struggle…

You could replace the word ‘gold’ with the words ‘real estate’ throughout this essay and it would apply today.


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8 replies
  1. Colton Lindsay
    Colton Lindsay says:

    Great writing… however I highly disagree with the analogy of Gold to real estate. How is it that we are in the middle of QE2 and everything thing behind the smoke and mirrors indicates QE3 and real estate will recover with great investments. The large amount of foreclosures that await us. The majority of mortgages are with Freddie and Fannie, and 68% of their loans have defaulted. Not to mention the US dollar has dropped 40% or more since the mortgage crisis that broke in 2008? And with the middle east oil crisis that has driven oil prices to current trade of $107 a barrel? Or the fact that one of the largest banks, HSBC will no longer accept US Deposits? The fact that the US Dollar is the World Reserve Currency and is threatened of losing that position because of quantum easing? At the beginning of QE2 foreign countries holdings in US Dollar was at 65%, now has reduced to 61% in just months? Or the fact that China is allowing and encouraging their national banks to hold and trade in physical gold? Or The fact the China and Russia now trade with each other in their own currency and not in the reserve currency US Dollar?

    Don’t get me wrong, Real Estate is a great investment when investing for cashflow. Yet, to own real estate and be slaved to mortgage payment that actually takes away from your cashflow and reduces your investment opportunities is definitely a terrible investment.

    Real Estate Market has a if we are lucky a 200 year history of the US housing market. Gold and Silver have a 5,000 year history. Not one fiat currency system has ever lasted over 250 years, and the US Dollar is now on year 235. You could trade gold before the 1930’s at around $30 an ounce and today it is trading around $1,500 an ounce. That is over 4,000 % inflation in less than 100 years.

    There comes a once in a lifetime investment for people and right now it is not real estate. It is silver. Research it.

    Colton Lindsay
    Real Estate Agent

    Want to sell more real estate, make more contacts and get better at presenting.

    Wan to make a ton of money, learn how the central banking system works and is a giant freaking ponzi scheme full of smoke and mirror’s and almost no one see’s the on to the back stage.

    Reply
    • Steve Harney
      Steve Harney says:

      @Colton,
      Wow, am I glad I have a decent position in silver. I am not an economist so I will leave most of what you claim for others to debate. However, where are you getting the fact that “The majority of mortgages are with Freddie and Fannie, and 68% of their loans have defaulted”? That is no where near the truth.

      Reply

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