The Craze in Housing Isn’t Fueled by Mania

Dear Wall Street Daily Reader,

We now have more realtors out there than houses for sale…

Seriously. As of January, the National Association of Realtors reported that there were roughly 1 million homes on the market. And there were nearly 1.5 million realtors out there to sell them.

Numbers like that seem to paint a clear picture… that the housing market is out of control.

That’s not really the case though, as I explained yesterday. The market might seem too hot. But we’re in the midst of a sentiment misfire.

That’s right… This is one of the rare times when I’m going to tell you, “Pay a little less attention to the crowd.”

The heat we’re seeing in the housing market isn’t driven by wild and unsustainable speculation. It’s driven by basic economics. That’s why I know there’s a lot more room for growth.

Today, I’ll share how we got here. And I’ll show you why the situation won’t end soon…

Seemingly infinite buyers… and few homes to go around. That’s the situation in housing right now. This didn’t just creep up on us overnight, either…

Homebuilders have been off their game since the Great Recession hit in 2008 and 2009. They haven’t kept up with demand.

Despite that, the mainstream media chronically misrepresents this story. They make the buying frenzy about market euphoria.

It’s also true that homebuilders are putting up new homes at the fastest rate since the Great Recession. But a lot of folks say that’s another sign of mania. One look at the long-term data reveals the problem with that framing…

Here we see what the U.S. Department of Housing and Urban Development describes as “new housing starts.” It’s the annual rate of new homes in construction each month. Take a look…

new US housing starts

Just by looking – no special tools needed – we can see that housing starts have been low for a long time. It’s much crazier than that, though…

U.S. housing starts first dipped below their long-term average (the horizontal line on the chart above) in 2007. And they stayed below that average for 149 consecutive months – roughly 12.5 years.

For most of the last decade, there were plenty of existing homes on the market to fill demand. Now, those existing homes have filled up. And homebuilders have only recently kicked new builds back into gear.

It’s no wonder prices are booming in residential housing. Americans are competing in one of the tightest housing markets on record.

So don’t let the market sentiment fool you. It might feel like we’re in a mania. But as you’ve seen, we’re just in a very tight market. And that means that the craziness happening today doesn’t have to end soon. If anything, it’s surprising that it took us so long to get to this point.

Simply put, this crazy housing market isn’t over yet… It’ll likely last longer than anyone imagines.

Good investing,

Steve Sjuggerud
Editor, Daily Wealth 
Stansberry Research

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