September 13, 2021
America is in the midst of one of the most robust housing booms of all time. Houses are often selling in just days, for record-high prices.
As an investor, have you missed the boat? Is it too late to get in?
We’ve got an expert to answer that question for you… Stansberry Research’s Dr. Steve Sjuggerud.
Steve has a Ph.D. in economics and finance experience that runs the gamut from Global Mutual Fund vice president to hedge-fund manager, with his sage advice landing him spots on Fox Business News, Bloomberg, and CNBC.
Today, Steve explains the reason the hot-housing market isn’t going anywhere… And why you shouldn’t let today’s prices scare you.
This Is Why the Housing Boom Will Continue…
Housing was already a hot market. Then, COVID-19 struck…
It poured fuel on the fire. And it has led to one of the craziest housing markets of our lifetimes.
Maybe you’ve experienced this firsthand if you went looking for a new home or investment property this year. If not, I’m sure you’ve at least seen the craziness taking place.
The pandemic revealed a major imbalance in the American housing market. The simple reality is, we haven’t been building enough homes.
Today, I’ll explain the simplest way to see that… and most importantly, what it tells us about how long the current housing boom could last.
I’ve covered this housing craziness before. But it’s worth looking at again because this crucial piece is what everyone seems to miss when they look at the housing market today.
After the housing crisis, homebuilders practically walked away from the game. Homebuilding rates fell to 50-year lows.
That decline made sense. We were in the worst housing bust of our lifetimes. But everyone knew it wouldn’t last forever. So you’d expect that building would have started up again soon enough.
Unfortunately, it didn’t.
Instead, new housing construction stayed below average rates… for a decade. Take a look…
This chart shows new housing starts between 1961 and 2021. It measures the number of “housing units” that have begun construction in the U.S. in a given month.
This metric includes multifamily units, like apartments, as well as single-family homes. But we commonly use it as a way to look at homebuilding in a broad sense.
As you can see, residential construction fell off a cliff in the wake of the housing bust. The problem was that as the economy improved, homebuilders never ramped back up.
That’s likely because home sales were incredibly low all through the last decade. You can see it in the table below, which breaks down the total number of single-family homes sold in the U.S. by decade. Take a look…
After the devastating housing bust, it’s no wonder that homebuilders slowed the pace of development as demand fell. But they slowed it too much and for too long… And it’s causing real problems today. In the 2010s, fewer single-family homes were sold in the U.S. than in the 1970s… Yet the U.S. population has grown by roughly 125 million since then!
Single-family homes have become a prized commodity in America. Demand has exploded again – far beyond the number of homes on the market.
All of this tells me that we could see another long-term boom for housing prices over the course of this decade. The last decade was simply too slow for it not to happen…
The National Association of Realtors believes the U.S. is short about 2 million single-family homes… and about 3.5 million multifamily units.
Looking at the single-family homes alone, that’s roughly $700 billion worth of inventory based on today’s median home price. The scale of this deficit is massive. And that’s just to get us in line with where we “should be” today… not with future demand.
America has a lot of building to do. That’s why we’re seeing such an incredible boom in the housing market today… And it’s why that trend will continue for years.
If you’re considering buying a new phone, this shocking tale could change your mind. Get the full story now.
Don’t Fear Soaring Home Prices
Now, along with the hot housing market, you may have noticed rising prices. Home prices have soared 16% over the last year.
I get it… That’s scary.
It probably makes you feel like it’s the mid-2000s again. That was the last time housing felt this crazy. And it was obviously a time of excess in the market, as prices rose much faster than what was sustainable.
It all ended with a massive collapse. And I understand if you’re worried about that happening again. But things are much different now, as I’ll explain today.
Not only have home prices risen less in recent years than you probably expect… but housing is also still affordable. And those two pieces mean this seemingly crazy boom can continue.
Let me explain…
Double-digit annual housing gains might feel like a bad sign. You might be wondering how a long-term boom can possibly continue from here.
There’s no question, the U.S. housing market is hot right now. But importantly, the median sale price for homes sold in the U.S. is only up 11% from its 2017 peak. Think about that… Prices have risen just 3% per year over the past few years.
That’s slower annual growth than much of what we’ve seen throughout history. Take a look…
Here is the price change per year of the average home sold in the U.S., separated by decade. These numbers might not seem huge, but housing doesn’t typically soar in double-digit percentages each year.
The 1970s bucked that trend. The U.S. had a high rate of inflation back then, and we see that reflected in home prices, too. The 1980s saw fast growth as well. But after that, we have three decades that show us a pretty consistent pattern…
Home prices tend to rise 3% to 4% per year. What we’ve seen in recent years is simply on trend. And it took the hot market to even catch up to those levels.
So yes, the market is hot… but no, the biggest price increases aren’t behind us. Housing can keep soaring from here.
If you still don’t believe that, you have to consider something else: housing affordability. The reality is that record-low interest rates have kept housing affordable even as prices soared.
You can see it in the chart below. It shows housing affordability, which takes incomes, interest rates, and home prices into account. A high level means housing is more affordable…
A reading of 100 on the chart means an American family with a typical income can afford the typical home. A reading of 150, like we have today, means that a family can afford 150% of the typical house price.
That tells us that housing is actually darn affordable throughout the U.S. today. And despite a recent fall, we’re still above the long-term average.
This paints a picture that few see in housing today. Yes, prices have soared… but they’ve simply been playing catch-up. And despite those increases, homes are still affordable.
That’s why this time is nothing like the mid-2000s. And it’s why the rise in home prices doesn’t scare me. Instead, the smart bet is that those gains will continue.
P.S. Steve’s story today is just the start of what he thinks will be the best decade for housing in history. He’s comparing it to gains on the recent meme-stock phenomenon… but with a much more quality investment. And as Steve says, housing isn’t just a market frenzy – “it’s one of the most powerful rapid wealth multipliers on the planet.”
He just released a new free presentation where he explains all the details. Click here to see why Steve is personally pouring almost every dollar of his own investible wealth into this market right now.
Love us? Hate us? Let us know at [email protected].
Managing Editor, American Consequences
With Editorial Staff
September 13, 2021