Average U.S. Home to Silver Ratio and U.S. Home to Gold Ratio
The following article will examine the relationship between Gold and Silver both the average-priced and the median-priced home in the United States. This is a fascinating way to express the buying power of Precious Metal.
Median House Price
As a refresher, median house price refers to the exact middle home price amongst all homes sold annually per region. That is to say, half the homes sold for less, while half sold for more. Location heavily influences the value of a given home. We know that the average home in city like Los Angeles will always cost more than similar house in a rural town in northern Mississippi, just as an example. It is easy to find information regarding regional median home prices on the Federal Reserve website. What it tells us is that between 1963 and 2016 the median home sale price in the United States’ Southern Region jumped from $16,800 $278,800 while the median home sale price in the United States’ Western Region grew from $18,000 in 1963 to $360,400 in 2016. Median home sale price in the United States’ Midwest Region swelled from $17,500 to $291,000 in those years, while the median home sale price in the United States’ Northeast was $20,400 in 1963 and a staggering $434,450 in 2016.
Overall Annual Median Sales Price
Now that we have established some regional price nuance, we can share with you that the overall annual median sales price for all homes sold in the United States in 1963 was $17,800 and $308,500 in 2016. A very simple calculation we can perform is dividing the median sale price of a home in the U.S. by its 1963 price in Silver or Gold versus its 2016 price of Silver or Gold. The 1963 median home price is equal to the purchase price of 12,816 ounces of Silver today, while a median priced home in early 2016 would cost the equivalent of 20,565 ounced of Silver. Thus, over the measured 53 year time span, median priced homes had gained 60.4% in value over that of Physical Silver.
In 1963 the Gold price was $35.25 per ounce, so a median-priced home in the USA cost the same as about 505 ounces of Gold. In the first quarter of 2016, the Gold averaged about $1,201.00 per ounce, so a median price home in the USA at the time cost the same as about 260 ounces of Gold. Over the 53-year time span we examined, median home prices had lost 48% in value versus Gold.
Why did Gold experience superior growth versus the median home price?
It has to do with the Gold to Silver Ratio. In 1963, the Gold to Silver ratio was about 27 to 37 while for much of 2016, the Gold to Silver ratio hovered just over 1 to 70. To put it another way, Silver was much more valuable in terms of both housing and Gold back in 1963 as compared to 2016. This is one reason why many bullion buyers today choose to purchase Silver rather than Gold; they believe Silver is undervalued at this time.
Gold to Average Home Price Ratio in the United States
An average price is the mean rather than the median, so it skews higher overall while still expressing a middle-of-the-road value. When we examine the ratio of Gold to an average-priced home in the United States, there are two obvious moments when U.S. housing peaked in value compared to Gold—just before Nixon’s closing the Gold window in 1971 and around the peak of dot com equity bubble in 2001. From these two peaks of the average housing price versus Gold of we can also see two dramatic drops which followed. In 1974 the value contained in just over 200 ounces of Gold could pay for an average-priced home in the United States, but this was followed by a temporary recovery where the ratio climbed back up to around 500 ounces in 1976. The drop in the average price of a home in the U.S. 1976 to Gold’s bull market peak in January 1980 touched about 100 oz of Gold per average house in the U.S. Within ten years, Gold had increased in value by 700% versus the average U.S. house price.
Gold Strengthens in Value
Perhaps this is what we are seeing right now in the 21st Century, as we are again witnessing a similar phenomenon of Gold strengthening in value versus housing. This time, however, this growth may stretch over more than double the time frame than the previous Gold bull market of the 1970s, which affected only the western world. Our information suggests that a revisit to 100 ounces of Gold value versus the average U.S. house price is possibility in the future. For now, let’s look at the value of Silver versus the average home price in the United States.
Silver Ratio to Average Home Price
Once again, an average price is the mean rather than the median, so it skews higher overall while still expressing a middle-of-the-road value. Examining this information, we see two distinct timeframes when U.S. housing peaked in value versus Silver, and it perfectly mirrors what we saw with Gold. By the end of 1971, the average home price in the U.S. had peaked against Silver at just over 20,000 ounces of Silver value per average house, in a ratio that wouldn’t be seen again for 15 years. By 2003, the average U.S. house price peaked at an all-time record high of over 50,000 ounces of Silver value per home. Since Silver spot prices climbed to nearly $50 per ounce in 2011, we have seen a real recovery in the average U.S. home price, especially versus Silver. We are eager to witness the path of this recovery.
Will we ever again see a time when the value contained in 2,000 ounces of Silver can buy an average-priced home in the United States? As the Baby Boomers—the largest generation—moves into retirement at a rate of about 10,000 people per day while more than half of the millennial generation currently live paycheck to paycheck as many of them suffer under the burden of record-sized college loans, the question of who will buy the inventory of U.S. houses the Boomers are vacating remains a mystery.
The U.S. Median
By studying and understanding the United States’ median and average home-price data to the value contained in Silver and Gold, you can develop a better idea of when housing may again become affordable or if the market may face another bubble.