“The bursting of the global housing bubble is only halfway through,” The Economist magazine wrote recently.
I disagree…
Here in the U.S. at least, the housing bubble is completely over.
It drives me nuts when I hear commentators say, “We’re halfway through,” and, “We have more pain to come.”
The fact is, right now, houses in America are the best value they’ve been in many generations. It’s not hard to understand…
The Economist showed a chart of home prices relative to incomes in their article. Instead of showing that home prices are expensive, the chart actually shows that U.S. houses are the best deal in history (going back four decades), relative to U.S. incomes.
Now, how can The Economist have an article about the continuing global housing bust… and then have another chart showing U.S. homes are the cheapest in four decades?
To attempt to explain this, The Economist says, “Prices [in America] may have reached a floor, but this is no guarantee of an imminent bounce.” Yes, that’s correct. We do not know the future, and we don’t know if another 5% dip is in the cards. But come on…
We DO know that extraordinary value exists right now in U.S. housing. You have the opportunity to buy fantastic investment properties at possibly once-in-a-lifetime prices.
So what if there’s “no guarantee of an imminent bounce”? When do you get a guarantee like that in investing anyway?
Another gripe I have is that the housing price-to-income ratio – The Economist‘s measure of value – is actually understating the opportunity. People don’t buy homes based on the price of the house relative to their income. People buy homes based on the mortgage payment of that house, relative to their incomes.
And right now, mortgage rates are off-the-charts low…
In 1980, mortgage rates were 15%. In 1990, they were 10%. In 2000, they were 8%. Today, they are below 4%. This is the greatest deal in U.S. history!
Anyone who’s ever bought a house knows that a 15% interest rate in 1980 is dramatically different than today’s rates below 4%. Any measure of housing affordability over time that doesn’t consider the mortgage payment is simply not that useful.
Housing prices today are the best value in history, according to The Economist‘s own chart… And if you include mortgage payments in your calculation instead of house prices, U.S. houses are a dramatically better deal.
In short, now is the time to buy a property in the United States.
Look, I get it… Times are tough. Most people either can’t or won’t take my advice to buy a house. But it is the right advice…
I am trying to follow it myself. My right-hand man has been forced to step away from his computers over and over again to go look at local investment properties with me.
And Porter Stansberry (the founder of Stansberry & Associates and the publisher of DailyWealth) is doing the same thing I am — investing in beaten-down real estate.
The reasons to buy now are incredibly simple:
- U.S. home prices are more affordable than ever — by far. (In Florida, for example, prices in many cases are down by half.)
- Mortgage rates are down to record-low levels, below 4%.
- You can often pay below-market prices (i.e. as lenders try to unload properties).
Of course, as The Economist says, there is “no guarantee of an imminent bounce.”
But with prices this low and with very few other great places to put your money in our zero-percent world… you need to seriously consider buying a property, if you can swing it. If you can buy right, and hang on for a few years, it could be the lowest-risk, highest-reward investment you’ll ever make.
In the United States of America, the bursting of the housing bubble isn’t halfway over… It’s COMPLETELY over.
Stop procrastinating. If you can do it, then get on it, now!
Shhhh don’t tell everyone,it’s fine by me if others miss the boat.
As an investment purchase, the tenant is the most important factor in this case. How do you go about procuring your tenant? Section 8th?
What kind of tenant occupation would you favor?
What would you require from your tenant to minimize loss of rent?
I am asking these questions because of our weak and fragile economy.
Dear Steve, Surely you jest! From which side of the bubble do you speak. It seems to me that your bent is towards the greedy investor. That’s great for him. For myself it ain’t so great. I am a state of Florida certified general contractor since the year 1973. That’s a lifetime for some people. During that time here in Miami Florida. I have experienced unbridled immigration, gas shortages, hurricanes, family deaths and other set backs. Now as I write my phones are dead, the only thing that comes by snail mail are bills. The only thing coming by email is spammers. I have lost since 09 $500,000.00 in home equity. I eagerly embrace the concept of this $$$t being “half over”. Please God let it be so. I’ll take half over any/every day and would surely love the absence of this, these experiences for the remaider of my lifetime.
Concepts For Building
Steve,
Buddy I got to tell you, I’m in the same shoes as Ralph. I’m a state contractor since ’78’ and this is more than a recession. I’ve been through 3-4 of them. RE is a great deal….less than it was several years ago. Speculative building went too far. Houses became an investment tool and when people lost money in the stock market, they pulled their money out of the SM and invested it into houses. Small Down Payment and leverage the rest, then flip it. Problem is when the music stopped, there were too many seats (housing units) and not enough folks playing “Musical Chairs”. Just the opposite of the way the game is supposed to go down. Unless the population increases in the saturated markets enough to absorb the excess units, things will remain the same. Also, Jobless tenants are no good to landlords, no matter how inexpensive the houses are and cheap the money is.
yes it would be an amazing time to buy a house – if the average consumer with good credit could get a bank loan.
If you are retired & been to Chapter 7 like me it’s hard to borrow money to buy a house, specially if you only live on social security &
still have a mortgage to pay.
We spoke of this at a local REIA meeting. Now is the time to BUY! I’m and truly sorry for all the contractors that have taken such a huge hit. The suncoast of Florida is booming with sales and rehabs. We may run out units to fill the need. Come to Sarasota! Buy now, buy as many as you can.
I live and operate my company in the Nashville, TN area, and while we didn’t experience the depth of depression as other real estate markets, we are seeing the best deals that we have ever seen! Additionally, tenant demand is up, so for the buy and hold investor, timing could not be better in my market. Postive cash flow deals are all around me!
As a very long time stock mrket investor one of the things I had to learn the hard way is: not to buy just because something looks cheap, or cheaper than it’s ever been. Those two situations happen ALL of the way down even when there’s lots more to go, and they also do happen at bottoms.
However, the problem is that EVERYONE is saying BUY BUY BUY all of the way down. So, I’ve learned to buy when a bottom is in place not when it’s lower than it’s been. That’s how you lose your shirt.
Another point is that for the first time in known history, we are in negative population growth. IN other words law of supply and demand has the U.S. locked in the supply side, more houses than people to buy. Which means that prices will continue to plummet until that situation corrects itself. I’m told that if we consciously decided to start having more kids that it would be 60 years before it came back to positive. That says the housing prices will continue going down for 60+ years.
Here on Long Island, NY I got in the RE thing in the late 90 prices were at a low but rates were at 15%. Now rates are at 4% but the same homes that I was purchasing for 20-80k are now 210-400. I feel this is no deal regardless of intererest rates. So do tell, please how is RE still a good deal today. I also think the majority of the forcolsures are still in front of us unfortunately.