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A Property Bubble in the U.S.? No WayBy
Tuesday, December 17, 2013
I love it...
Many so-called "experts" are now worrying about a property bubble here in the U.S.
History says our opportunity in housing is still great. And all this bubble talk is way overblown. Let me explain...
The thought of a property bubble today in the U.S. just makes me laugh...
Think about this... I was just in Hong Kong, where the typical residential property sells for over $1,000 per square foot. (Amount in U.S. dollars, not Hong Kong dollars.) At that price, a tiny 500-square-foot apartment sells for over $500,000!
By comparison, the median house price in the U.S. is less than $100 per square foot.
Which sounds more like a bubble to you?
Over $1,000 per square foot in Hong Kong… or less than $100 per square foot in the U.S.?
The U.S. is cheap!
With such cheap housing here, you might think there's a big reason for it... like an extreme oversupply of new homes. (An oversupply of something usually drives prices down.) But that is completely wrong...
Since the housing bust, homebuilders have NOT been building. Meanwhile, the need for housing in America typically stays relatively unchanged... because Americans are still having babies, and those babies need shelter.
But homebuilders haven't been building that shelter...
As you can see in the chart below, homebuilders have a lot of catching up to do.
 Of course, many of the so-called "experts" disagree with me... They say that housing IS in a bubble. The reason they usually cite is that house prices have gone up fast...
The median new home price in the U.S. is up 16% over the last two years. And certain markets are up even more. Las Vegas prices, for example, are up nearly 30% in the last year. San Francisco prices are up over 25%.
We must be in bubble territory after gains like this... right? No...
If we look at individual cities, it's obvious how absurd the bubble talk really is. Las Vegas – the biggest gainer recently – is still 46% below its peak prices from a few years ago. San Francisco is still 18% below its all-time high.
In fact, only two of the 20 major U.S. cities have reached new highs… Hardly a bubble.
In short, property prices in the U.S. are still ridiculously cheap compared with places like Hong Kong. And U.S. houses are still incredibly affordable for Americans (thanks to low interest rates).
So it doesn't look like there is a housing bubble in America now – for a couple solid reasons:
That's a recipe for higher home prices and more home sales – not a housing bust. I'm heavily investing in Florida real estate myself. I suggest you get to know your own market and put money to work. This opportunity won't last forever.
Good investing,
Steve
Further Reading:
"As I've said many times over the last three years, I expect asset prices to go higher than anyone can imagine in this boom," Steve writes. "The problem is, it's a false boom... And a bust is inevitable." Learn why Steve believes housing is The Best Way to Profit from the Boom AND Survive the Bust.
"The best man on the planet at predicting interest rates" thinks they could stay low until 2035, Steve writes. "If your retirement portfolio can't handle that possibility, you need to make some changes now..."
Market NotesA BIG BULL MARKET IN INTERNET STOCKS It's not as wild as the late '90s… But Internet stocks are booming.
Last week, we showed you how the big trend in "cashless transactions" is boosting profits for credit card companies. A lot of that spending – on the part of businesses and individuals – is flowing to companies with a strong presence on the Internet. For evidence, we look at a group of these stocks…
The First Trust Dow Jones Internet Index Fund (FDN) is a one-click way to buy a diverse basket of Internet-based businesses. The fund's 41 holdings include some of the most valuable and popular brand names in the world… like Google, Amazon, Facebook, and Yahoo, which make up about a third of the fund.
As you can see in the chart below, Internet stocks are in a big uptrend. Shares of FDN are up 82% over the last two years. And over the last six months, the fund is up 25%... making it the top-performing investment fund of more than 70 that we follow.
More than a decade after the bubble, Internet stocks are heating up again.
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