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You Haven't Missed It – The Housing Boom Will Last for YearsBy
Tuesday, December 12, 2017
It has been a slow grind... But the boom times are back in the U.S. housing market.
This is no surprise to anyone who's read DailyWealth in recent years. I've been pounding the table since 2011... telling everyone who would listen to buy a home.
Still, now that it's here, we have no reason to think this boom will end anytime soon.
New home sales recently hit a multiyear high. And supply and demand says prices can still move dramatically higher in the years to come.
Let me explain...
Make no mistake about it... We're smack in the middle of another U.S. housing boom.
October's housing data came out recently. New home sales hit a 10-year high... and increased nearly 19% over the prior year.
That means new home sales have hit their highest level since October 2007. And as you can see in the chart below, it has been a consistent climb since the bust...
 New home sales have risen every calendar year since 2010. And that's nearly certain to happen again this year. Still, sales are just getting back to "normal" levels today. October's new homes sales rate was slightly above the average since 1965. But the strong trend means we could see sales continue to move higher in the coming months.
It's not hard to figure out what that increased demand would mean for prices...
Supply of new homes is low. We have several ways to measure that. But the simplest way is to look at housing starts – the number of new homes being built.
Starts have been on the rise in recent years. Yet they're still significantly less than "normal" long-term levels...
 Housing starts are increasing, but they're still low. That paints a clear picture for house prices... We have low supply... and a 10-year high in demand based on new home sales.
What happens next is Economics 101. Low supply plus high demand equals dramatically higher U.S. housing prices.
I'm sure I sound like a broken record... I've been bullish on U.S. real estate since 2011. But the opportunity today is enormous...
Most folks think they've missed it... They think this boom will end like the last one did – and soon.
It won't.
You want to own housing and real estate now. The boom is here. But the fundamentals are healthy and stable.
That's why I believe we'll see years of upside before buyers have anything to worry about.
Good investing,
Steve
Further Reading:
"Higher house prices have been part of my big theme for the last eight years," Steve writes. Just as stocks are soaring to new heights, the boom time is arriving in real estate. Read more here: New Home Sales 'Soaring' and 'Surging,' With More Gains to Come.
"Housing could be a good alternative when stocks start to falter," Steve says. According to one study, adding real estate to your portfolio could help you get higher gains with less risk. Learn more here: Think Stocks Are the Best Long-Term Investment? Think Again.
Market NotesTHIS BANK HAS NO BRANCHES... AND IT'S THRIVING Today's chart highlights a major shift in business...
Longtime readers know we like investing in big secular trends. And one we're seeing now is the shift away from traditional "asset heavy" businesses to "asset light" businesses. Consider the traditional taxi or hotel industries. The new players – like ride-sharing app Uber and lodging service AirBnB – don't own any taxis or real estate. This business model is catching on... And it works.
Today, we're seeing this concept in shares of Ally Financial (ALLY). Ally is a $13 billion online bank. As of last month, the company had more than 5 million customers and $164 billion in assets – and no physical locations. That means big savings on rent, utilities, and bank security... or said another way, big profits for shareholders. Over the past year, Ally's earnings per share climbed to $2.16. That's up 16% from the year before.
As you can see below, the stock is on a tear. Shares are up more than 50% this year... And they just hit a new all-time high. Keep an eye on this new wave of asset-light businesses...
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