It's Time To Buy A House, But Only If You Put A Hedge Around It.

Inflation is expected to reach double digits soon. Homes have been a great hedge against inflation, but only if inflation stays within a certain channel. That channel is now busted and the cost of living matches or exceeds any gains from real estate. I think we were featured when we published the prophetic blog stating that houses will probably loose half their value. We pointed out the japanese real estate experience. So here we are, yes in some areas homes have lost even over half their value, but most sections of the country price declines have been muted but painful. If double-digit or "to infinty" inflation takes hold, not owning a home and then getting smacked with soaring rental costs will certainly ring true that yes the martian was right, the time to buy a house is 2008, but how to do it. The formula that we present is only bar napkin calcs. House sold for $400,000 in 2006 and now sells for $300,000. The projected potential loss would be a further $100,000 loss in the value of the home. 10% of $100,000 would be $10,000 which would be a minimum that one should have in gold or silver. That's a minimum, 15% or more would be better, but at 10% you should be covered from the cost of living while owning a home. You could make a case that those homes that have fallen 50% or more may not need to hedge. Skyrocketing rental costs should be a sail behind your back, but hedge none the less would be better. If you should lose your job or other income, your gold / silver nest egg will cover you for awhile, but if prices start going hyper-inflation, then you don't even need to work. Over 1,000 banks are expected to fail and stock brokers as well. You need your gold and silver in your hand...