The mainstream opinion seems to be that housing is turning around and will head much higher and, thus, the sudden rush into buying housing. What makes them think that housing will out-perform precious metals and other commodities?
Also, where did these people have their money for the past four years? In cash? Are they cashing out their stock portfolios to buy housing? If so, why did not they buy precious metals--especially silver--four years ago, which they could now sell for a huge profit to buy housing?
To paraphrase Marc Faber: We're all doomed, but that doesn't mean that we can't make money in the process.
Rabbi Lapin: "Let's make bricks!"
Stephan Kinsella: "Say you and I both want to make a German chocolate cake."
The reason is faith. There isn't a logical reason to return to a market that is still collapsing, when commodities are ascending. However, both in the US and the UK the banks and government are committed to resuscitating this market, because it directly affects consumer borrowing ability. They will do so by subsidising mortgages and giving tax deductions on interest payments, amongst other things.
My suspicion as to why housing is so pivotal to government policy is because it is linked to consumer credit.
Freedom of markets is positively correlated with the degree of evolution in any society...
There are lots of people who believe that housing is bottoming out and that prices are going to start moving up. WIll they move up faster than gold or oil? I don't know, but I do know that I live in a 20year old house that is 35 minutes from work and beginning to fall apart. My new home is much newer and 20 minutes from work.
Where is all of the money going? Probably to foreign central banks. As of Jan 2011, the country of Switzerland with 8million folks has a central bank holding $194 billion in US Treasuries. That is $24K per person. The country of Luxembourg is more amusing as at the same time, its population of 600,000 folks owns $139 billion of US Treasuries or $231K per person. There is no way the USA can trade this much stuff with these people so this debt will eventually be default on leaving their citizens with a big Thank You.