Are New Home Prices Rising? Nope, That's Just Inflation.

I keep seeing things, scary things, terrifying things characterized as “for the first time ever,” like Tyler Durden of writing that “As per the August 31 DTS statement, the US ended the month with a new all-time record of $13.45 trillion in debt, an increase of $210 billion from the beginning of the month (or $225 billion in public debt, net of intragovernmental holdings). With just 30 days left in fiscal year 2010, the US has added $1.54 trillion in the eleven months ended August 31, a monthly average increase of $140 billion. As a point of reference, the US has received $1.53 trillion in withheld income tax over the same period, confirming that the US continues to issue more than one dollar in debt for every dollar it receives via income tax revenue,” all of which are new records of one kind or another! Gaaaah! I am screaming in outrage and fear!

Martin Hutchinson of the Bear’s Lair lays it right out there, too, with “Combining the Worst” in that “both new home sales and existing home sales for July dropped by double-digit percentages to levels never seen in the history of the series.”

The worst ever! Even my little pea-brain can see the significance in this! Wow!

Then, perhaps trying to calm me down, he admits that maybe “ever” is kind of a relative term, in that “While for existing homes the series dates back only to 1999, for new homes it dates back to 1959.”

It worked! I realized that new houses have always gone up in price for the last half century because inflation was a fact-of-life for half a century because the government deficit-spent for half a century and the Federal Reserve created the money needed for a half a century, which only proves that Alan Greenspan, chairman of the Federal Reserve from 1987 to 2006, is a malevolent demon from hell who has destroyed us by creating So, So Much Money (SSMM), and we ought to track this man down and punish him relentlessly!

Well, you can see that Mr. Hutchinson does not want to get into a weird, hate-filled discussion about tracking people down and exacting vengeance with mob-rule mentality, and he tries to bring the discussion back around to home sales by saying that the result is that “the decline in new homes sales tells us that 50 years of growth has been wiped out in that market”!

Wow! A half-century, gone!

And all of this misery, and people owing more on the house than their house is worth, is at a time that the “Case-Shiller 20-city house price index” is still 47% above the January 2000 value! In fact, “house prices are still about 5-8% above their long-term average in terms of incomes,” which seems surprising in light of all the negative press of the decline in house prices over the last few years!

With a sense of horror, I realize that, sure enough, this 47% increase in house prices “matches the consumer price rise during the period”! Gaaahhh! 47% inflation in consumer prices over 10 years!

This means, to my Sheer Mogambo Outrage (SMO), that all things cost about 47% more than they did in 2000, which is a compounded 3.9% inflation per year, which is not only historically horrifying, but is about half of the real inflation rate Right Freaking Now (RFN), which is above 8%, as calculated by John Williams at!

In short, We’re Freaking Doomed (WFD), and the only way I can find to be “un-doomed” is to buy gold, silver and oil with every penny you can scrape up before that penny loses most, or all, of its purchasing power.

And I say this not because I am a smug, know-it-all loudmouth who loves the sound of his own voice and tricking people into believing that I know what I am talking about, but because if there was another way to preserve wealth against governmental debasement of the currency in the last 4,500 years of history of governments debasing currencies, I would have probably heard about it.

But just mindlessly buying gold, silver and oil makes investing so easy that you say, “Whee! This investing stuff is easy!”

The Mogambo Guru
for The Daily Reckoning

The Daily Reckoning