“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!
