“The Next Housing Boom Is Closer Than You Think”
The title of this blog is taken directly from this blog by Stansberry Research.
I have hit the topic of a strong housing market numerous times in recent months but am hitting it again for several reasons: (1) Stansberry Research normally touts stocks, so when they shift to touting housing it means something; (2) some of our clients and referral partners told me I was being too optimistic about housing; and (3) we are preparing some new informational collateral for First-Time Homebuyers and we want to use all of this data to help them feel very optimistic about their pending purchases.
COVID-19 HELPED HOUSING PRICES – HERE’S WHY
The Stansberry blog referenced above states: “when you combine today’s economic conditions with low mortgage rates… the housing market is ready to soar.”
One of the reasons housing prices remain so strong is record-low inventories, and COVID-19 exacerbated that issue as “new housing starts fell off a cliff” b/c of the crisis.
SUPPLY OF HOUSING
Barry Habib, founder and CEO of MBS Highway, points out again and again how every housing bust is preceded by record-high inventory levels like we saw in 1987 and 2007.
He then contrasts that with the all-time record low inventories we are seeing today.
DEMAND FOR HOUSING
Habib also frequently points out how demographic trends are all but certain to continue to spike demand for housing.
He is so certain b/c he sees the average ages of millennial homebuyers in the U.S. population, and more importantly, he sees that a huge surge of millennials is just now hitting the typical homebuying age.
Habib also points out the massive influx of online wedding and baby registries as additional indicators that demand will surge.
30 – 39 year-olds with no kids have a 38% likelihood of owning a home; 30 – 39 year-olds with one child have an 80% likelihood.
Here is a short video by Habib where he sets out this data.
I recently blogged about The Fed’s Plans to Keep Rates Low For Years. Low rates increase buying power and spur more demand.
Foreign buyers continue to inflate the housing market as well, as many economies outside of the U.S. are much more precarious than ours and foreign buyers like U.S. real estate as a safety hedge.
I touch on this often too, but real estate is an excellent inflation hedge. In addition, we have been seeing significant inflation and will continue to see inflation in the form of “asset inflation” for years – like I blogged about here.
We also have numerous sophisticated clients who continue to buy up residential housing very aggressively at the suggestion of their financial advisors – who believe that the inflation threat is very real.
UNPRECEDENTED FED/FISCAL POLICY
In recent months the Fed and the Federal Government have effectively created about $6 trillion of money out of thin air. Some of this is with “quantitative easing” or massive bond buying (mortgages, corporate debt and Treasuries) and some of it was through straight government stimulus through the Paycheck Protection Plan and similar programs. The results of all this is both additional housing market stimulus and the potential for significant inflation at some point. In this Masters in Business podcast, economist and Wharton Professor, Jeremy Siegel, predicts inflation levels as high as 15% as early as next year.
GOLDMAN SACHS TOO
This Exchanges at Goldman Sachs podcast from late April corroborates much of what I am setting out above – just in case readers want some additional sources to back up these points.
NO FORECLOSURES/MARKET IS VERY HOT NOW
Pending Home Sales Spike a Record 44.3% in May, according to a CNBC headline. Zillow searches and purchase money mortgage applications are also way up this year.
In addition, we did not see a spike in foreclosures as a result of the COVID-19 crisis. This is partially b/c of government policy/assistance, but mostly b/c of much more sound lending practices over the last year.
PRIOR TO 2008, I WAS CALLED “MR. DOOM AND GLOOM”
Prior to 2008, I saw the trends in housing inventory and the crazy lending guidelines and I, like many others, saw the housing crash coming and said as much often.
As a result, I was often referred to as “Mr. Doom and Gloom.”
I point that out to show that I do not always tout housing – even though doing so might appear to be in my best interest.
Today is much different than 2007 and I am very bullish on housing.
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