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The One Chart That Shows Why Housing Prices Will Go UpBy
Tuesday, April 29, 2014
Janet Yellen showed her cards...
In a speech, the Federal Reserve Chair said:
That is a direct quote. And it's not the only time the Federal Reserve has talked about propping up the housing market. My friend, we are being dealt a once-in-a-few-generations opportunity here...
Houses in much of America are incredibly affordable right now, thanks to near-record-low mortgage rates. Meanwhile, the Federal Reserve is "trying to make homes more affordable and revive the housing market."
To me, this is a one-way bet...
The bottom was hit. And even though prices are up, I believe you are not going to see today's prices ever again.
One simple reason is there is nothing out there to buy. Homebuilders haven't been building homes.
The thing is, people keep having babies... And those families need roofs over their heads. But those roofs aren't being built – at least not yet. Take a look:
 The chart isn't complicated... The black line is the number of houses about to be built. The grey bars show recessions. Every time the economy went into recession, builders stopped building homes.
The important part is, builders eventually started building again after recession. Babies kept being born and families kept needing houses.
Over time, we always got back to the trend line. Looking at this chart, it's not much of a stretch to imagine housing starts going back up to their trend line of around 1.5 million homes built a year.
I am incredibly optimistic about the housing market (particularly where I live in the Southeastern U.S.).
I don't even think it's a bold prediction to say that house prices will continue to go up. It's just basic economics.
Looking forward, we need more housing starts. The chart tells the story. Until housing starts go up, I expect we'll see higher and higher home prices in the U.S.
I personally have been buying real estate... Yes, prices have moved up. But I don't think it's too late, at all.
I suggest you consider doing the same, if you haven't already...
Good investing,
Steve
Further Reading:
How high can home prices in in the U.S. go? To answer that, Steve says, you just need three simple numbers. Find out what they are right here.
"Real estate in Miami in particular, and Florida in general, is booming," Steve writes. He says condo prices in Miami have already made "an astonishing move – a 100% gain in prices..." But Steve is still buying today. Learn his two big reasons why here: The Viagra Cycle in Florida.
Market NotesCHEVRON: A CONTRARIAN CALL PAYS OFF Doc Eifrig's note in February urging readers to buy Chevron is turning out to be a heck of a call...
At the time, stocks had experienced a big sell-off. Many folks believed it was the end of the bull market... and many newsletter writers told their readers to sell. But Doc saw opportunity in the fear...
Nothing in the market had fundamentally changed. Rates were still low, the economy was still growing, and corporate profits remained strong. He said the sell-off was a great opportunity to buy quality dividend-paying stocks at a discount. The example he shared was Chevron:
Almost three months later, stocks are back near all-time highs... and Chevron shares are near $125. As you can see from the chart below, Doc timed his note just about perfectly.  |
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