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Those Fools... The Housing Bust is OVER

By Dr. Steve Sjuggerud
Monday, December 12, 2011

"The bursting of the global housing bubble is only halfway through," The Economist magazine wrote recently.
 
I disagree...
 
Here in the U.S. at least, the housing bubble is completely over.
 
It drives me nuts when I hear commentators say, "We're halfway through," and, "We have more pain to come."
 
Here's the FACT: Right now, houses in America are the best value they've been in many generations. It's not hard to understand...
 
The Economist showed a chart of home prices relative to incomes in that article. Instead of showing that home prices are expensive, the chart shows that U.S. houses are the best deal in history (going back four decades), relative to U.S. incomes.
 
Now, how can The Economist have an article about the continuing global housing bust... and then show a chart showing U.S. homes are the cheapest in four decades?
 
To attempt to explain this, The Economist says, "Prices [in America] may have reached a floor, but this is no guarantee of an imminent bounce." Yes, that's correct. We can't know the future. We can't know if another 5% dip is in the cards. But c'mon...
 
We CAN know that extraordinary value exists right now in U.S. housing. You have the chance to buy fantastic properties at possibly once-in-a-lifetime prices.
 
So what if there's "no guarantee of an imminent bounce"? When do you get a guarantee like that in investing anyway?
 
Another gripe I have is that the housing price-to-income ratio – The Economist's measure of value – is actually understating the opportunity. People don't buy homes based on the price of the house relative to their income. People buy homes based on the mortgage payment of that house, relative to their incomes.
 
And right now, mortgage rates are off-the-charts low...
 
In 1980, mortgage rates were 15%. In 1990, they were 10%. In 2000, they were 8%. Today, they are BELOW 4%. It is the greatest deal in U.S. history.
 
Anyone who's ever bought a house knows that a 15% interest rate in 1980 is dramatically different than today's rates below 4%. Any measure of housing affordability over time that doesn't consider the mortgage payment is simply not that useful.
 
Housing prices are the best value in history, according to The Economist's own chart... And if you include mortgage payments in your calculation instead of house prices, U.S. houses are actually a dramatically better deal.
 
 
Look, I get it... Times are tough. Most people either can't or won't take my advice to buy a house. But it is the right advice...
 
I am trying to follow it myself... My right-hand man Brett Eversole has been forced to step away from his computers over and over again to go look at local properties with me.
 
And Porter Stansberry (the founder of Stansberry & Associates and the publisher of DailyWealth) is doing the same thing I am... investing in beaten-down real estate.
 
The reasons to buy now are incredibly simple:
  • U.S. home prices are more affordable than ever – by far. (Here in my home state of Florida, prices in many cases are down by half.) 
  • Mortgage rates are down to record-low levels, below 4%.
  • You can often pay below-market prices (as banks try to unload properties, for example).
Of course, as The Economist says, there is "no guarantee of an imminent bounce."
 
But with prices this low and with very few other great places to put your money in our zero-percent world... if you can swing it, you need to consider buying a house.
 
If you can buy right, and hang on for a couple years, it could be the lowest-risk, highest-reward investment you ever make...
 
In America, the bursting of the housing bubble isn't halfway over. It's COMPLETELY over.
 
Stop procrastinating. If you can do it, get on it, now.
 
Good investing,
 
Steve




Further Reading:

Catch up on some of Steve's favorite deals in real estate here...
 
"I never intended to make a mortgage loan. I never intended to 'be the bank,' Steve writes. "But these days, banks won't make this particular loan..."
 
"The reality is... if you want to buy any investment for pennies on the dollar, you have to be willing to buy when things appear bleak."
 
"With a little bit of homework and a little bit of luck, you can see similar returns on your property investments."

Market Notes


NEW HIGHS OF NOTE LAST WEEK
 
Diageo (DEO)... booze
Altria (MO)... cigarettes
Domino's Pizza (DPZ)... pizza
Philip Morris Int'l (PM)... cigarettes
McDonald's (MCD)... burgers and fries
Brown-Forman (BF-A)... Jack Daniels, other liquors
Yum! Brands (YUM)... burgers, fried chicken, tacos
B&G Foods (BGS)... nutrient-light, calorie-dense packaged foods
General Mills (GIS)... giant industrial U.S. food processor
Home Depot (HD)... the American dream lives
Core Laboratories (CLB)... advanced seismic data for oil & gas industry

NEW LOWS OF NOTE LAST WEEK
 
Intrepid Potash (IPI)... potash
Harvest Natural Resources (HNR)... Venezuelan oil

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A stealth bull market is underway. Here's what to buy...
 
If history repeats itself, you could make hundreds of percent gains...
 

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