First, the zombie horror show that is housing today. In the previous decade, Americans came to view housing as "safe" relative to stocks and bonds - particularly after the 2001 terrorist attacks and resulting decline in the markets.
Pre-bubble, housing prices rose about 3.5 percent to 4 percent annually, since the 1970s. But then the housing bubble kicked in between 2001 and mid-2006, and home prices rose at an unprecedented 13 percent a year (that is, the compound annual growth rate according to the S&P/Case Schiller Home Price 10-City Index).
Then the roof caved in. Amid the subprime-mortgage blowup, home prices corrected painfully between 2007 and 2010. Case Schiller came out with another round of awful U.S. home-price data last week, prompting forecasts of a double dip in prices.
It's still an affordable time to borrow. Mortgage rates are at historical lows, if you can find a lender who'll bank you. But, "when you buy a house today, you're buying an asset that's been falling," says Barry Ritholtz, author of Bailout Nation and chief executive officer of the New York investment-research firm FusionIQ. "The timeline for buying a house makes more sense if you can wait a few years."
And if you do buy, expect the old 4 percent rate of appreciation.
On a $300,000 house, say, the cost of maintenance, property taxes, and insurance add up to roughly $20,000 a year - and that's not even including the monthly mortgage payment. If that amount exceeds renting for the year, then keep renting.
So what are you going to do with the cash you've been saving? Here's where buying gold comes into the picture. Cheap? Not the question. It's whether it will rise from here.
"Gold doesn't have value, other than what someone else can pay out, so by definition it is somewhat speculative," warns Ritholtz, who sold most of his gold position when the metal hit $1,350 an ounce in October 2010. Gold is volatile: He said it could have another run-up to $2,000 or fall to $500.
He recommends going small on gold: Five percent to 10 percent of your portfolio or savings.
Notably, gold and home prices have parted ways. U.S. home prices were driven by easy lending and a healthy economy, and those drivers are gone. Gold's price is driven by, among other things, fear of inflation and uncertainty about whether paper currencies will devalue.
Because of that, gold is smack in the middle of what commodity investors say they believe is a 20-year bull market.
Assuming you can buy a home with a fixed 4.75 percent, 30-year mortgage, your return on your home could generate between 1 percent and 4 percent a year, and you're making a small down payment, according to Pershing Square Capital Management L.P., a hedge fund that is making serious bets on single-family homes.
Gold, meanwhile, has posted double-digit returns. In 2010 alone, the metal climbed 30 percent.
Assuming you believe in the gold story for the next few years, there are several ways to invest, aside from buying gold coins or even bullion bars.
Investors can buy publicly traded gold companies, including Barrick Gold Corp., Harmony Gold Mining Co. Ltd., AngloGold Ashanti Ltd., BHP Billiton, Gold Fields Ltd., Newmont Mining Corp., and many others.
The gold exchange-traded fund was introduced in 2004, allowing the holder to make a claim on physical gold held in vaults, although these exchange-traded funds are held in traditional brokerage accounts.
There are now many precious-metals ETFs, including SPDR Gold (GLD), iShares Silver Trust (SLV), and precious-metals mutual funds. But buyers, beware: When buying gold ETFs, many are taxed at a 28 percent collectibles rate, because the underlying funds own precious metals. That's a much higher rate than the capital-gains tax you pay on a gold-mining stock.
And beware buying gold online: Companies such as Goldline have been reported to charge 60 percent or higher commissions on top of the gold price. Make sure you know what commissions are charged.
"If you're buying a home to live in, that's not because you consider it an investment," says Peter Schiff, president of Euro Pacific Capital Inc., of Westport, Conn. His brokerage firm sells Perth mint certificates for gold stored in Australia and bullion for physical delivery to you (which means he's obviously biased toward gold).
"If you put your money, say $100,000, [into gold] in 10 years it could be worth $500,000. If you buy a $500,000 house today, in 10 years it might be worth less."
Both a home and gold may prove effective investments in "real" assets. But renting for now and using the cash elsewhere to fetch a higher return might make sense. If only we could build houses out of bullion. For the latest updates PRESS CTR + D or visit Stock Market news Today
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