Last Monday, I alerted you to some very compelling information. If you recall, my sources in the printing industry told me that “major orders are coming in from home-builders.”
It’s the first sign of life from a market assumed dead or dying.
So was it a coincidence that on Thursday, Louis Basenese backed up my boots-on-the-ground indicators by emphatically saying, “The real estate market just hit rock bottom?”
Not a chance!
Such a reality represents a significant moment of opportunity for investment. And we want you to know everything about it.
You see, no one is looking. Everyone else is up on the boardwalk buying cotton candy. They’re all missing the boat, and it’s our job to make sure you don’t miss it, too.
To that end, we’re devoting more than our usual space to this topic, because this point can’t be stressed enough.
Without further ado, here are a few more indicators that the housing market has indeed bottomed out and is only headed higher from here.
Dead Money Comes Alive
In September, executives at homebuilder, Pulte Homes (NYSE: PHM), began buying their own company’s stock. Most of the purchases were at around $4.40 per share.
Today, Pulte is trading near its 52-week high of $8.69. Not a bad haul in a sector that most believe is dead money.
That belief is hardly surprising, given the gloomy talk of a huge inventory glut… all those foreclosed properties that have yet to hit the market… new home sales still at record lows… unemployment decreasing. But it’s still much higher than during the boom times of 2002-2006.
And it’s true that property prices – while not falling off a cliff anymore – are still only stable-to-falling in many parts of the country.
So at first glance, no, the housing market doesn’t look so hot.
But look a little closer…
- You have Pulte insiders buying – and making gains from – their own supposedly ailing sector.
- In areas that are the hardest hit, prices are beginning to firm. Rents across the country are rising.
- In Florida, median home prices are expected to increase in 2012.
If you think about it, these statistics make sense.
After years of double-digit plunges, it’s expected for median prices to move up. And more people – the folks that can’t afford to or aren’t qualified to buy – have entered the rental market, causing demand to increase.
However, what really leads me to believe that the market has bottomed is the amount of activity I see in areas like Florida.
The Sunshine State Spares a Few Rays for Real Estate
Florida has been one of the hardest-hit real estate markets in the United States.
Almost across the board, home prices in Florida fell from their height by between 30% and 50%. And in some locations, prices have fallen by even more.
An epic financial tragedy, if ever.
I’ve been personally engaged with the Florida market for years now, witnessing firsthand – and been directly affected by – the horrible crash. But now I’m starting to see something else entirely.
In places like Miami, huge inflows of cash are coming in from South America and upscale condos are being built. Prices have stabilized or are straight-up increasing again. There’s home inventory, sure, but there isn’t nearly the same desperation that was there in 2010 and early 2011.
In places like Orlando, where I’ve bought rental real estate, prices have now reached a point where one of three things is happening:
- There’s a bidding war on good real estate prospects.
- Homes are actually appearing with “sale pending” signs within hours of being listed (indicating inside trades between realtors and their friends or investors).
- There are higher asking prices.
All are signs that housing is beginning to attract attention again.
The anecdotal information that I passed on to you about print shops in the area seeing business pick up, especially from homebuilders, is visibly playing out in the marketplace.
No, home prices aren’t going to soar in 2012. And, no, they probably won’t reach the kind of levels we saw in 2006 for another five to 10 years in many places – if ever…
But that doesn’t mean there isn’t potential for appreciation and rental income.
The Perfect Storm for a Real Estate Rebound
Do your homework like I have and you’ll find that in many places, you can buy homes or condos not only at the prices they sold for in 2001 – prior to when the housing bubble began – but you can even snag them at levels they sat at in the early 90s!
Add to that the availability of cheap money, the lack of alternative investments for those who are sitting on cash, and you have a perfect storm for gains – and in what the majority believes is the most depressed and hated of all markets.
If you have your back turned because of popular sentiment, in the end there’s nothing to say but, “You snooze, you lose!”
Bottom line: When investors despise markets the most, that’s when you should start paying attention to them. After hitting bottom so hard, the ensuing direction is usually up. And the housing market is no exception.
So look carefully, “think contrarian” and you’ll catch those opportunities that most investors miss.
Ahead of the tape,