A Decade Low in Housing Affordability Won't Kill the Real Estate Boom

I've spent years urging anyone who would listen to buy a house...

Folks didn't want to hear that story back in 2011, when I first began pounding the table. Investors were scared. Nobody wanted to buy.

That's why housing was such a great deal, though. It was dirt-cheap and hitting all-time levels of affordability.

Plenty has changed since then...

U.S. home prices have steadily climbed, and housing affordability has fallen as a result.

Today, housing affordability is at a decade low. But as I'll show, that doesn't mean the boom is dead.

Let me explain...

The idea of housing affordability is simple. When someone buys a home, he doesn't worry so much about the purchase price... He worries about the monthly payment. If he can afford the payment, he can afford the house.

The monthly payment includes a few numbers... namely the home's price and the interest rate. Compare that with the person's income, and you know how affordable (or not) a home would be.

Importantly, these numbers are similar for a lot of folks. So the National Association of Realtors uses median home prices, median income, and mortgage rates to build an overall measure of housing affordability in America.

This indicator tells us if housing is cheap, expensive, or somewhere in between.

Again, things have changed since I first began urging readers to buy real estate. Housing affordability is now at a 10-year low. Take a look...

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A high affordability number indicates housing is cheap... signaling a great time to buy. A low number indicates an expensive market, where folks will have to stretch to buy.

You can see that housing is getting less affordable. It recently fell to affordability levels not seen since 2008. But that doesn't tell the full story.

Despite a decade low for affordability, we're now right at the long-term average. Check it out...

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It's true that the easy money in real estate might be behind us. But affordability hasn't completely dried up.

We are clearly in the late innings of this boom. The great deals are getting harder to find, but certain markets still have plenty of value remaining.

I've personally put a large chunk of my net worth into Florida real estate. I've sold some of those properties for big profits... but I've been able to find new deals too.

So while affordability is down, I remain bullish on U.S. housing. We're still near the long-term average for affordability in U.S. housing. And folks can still make money in U.S. real estate.

If you're looking to put money to work, buying a house is still a solid deal today.

Good investing,

Steve

Further Reading

How are the trade-war tariffs affecting U.S. real estate? Steve wanted to get the story from someone with "boots on the ground." What he learned might surprise you... Read more here: 'You Bet' Tariffs Affected Our Housing Market.

"I love the idea of owning farmland," Steve writes. "You can earn solid income... Plus, that income can keep up with inflation." Recently, he discovered a potential opportunity in the sector. Learn more here: How to Buy Farmland at a Discount in Your Brokerage Account.

Market Notes
A NEW SUCCESSOR TO CABLE TELEVISION

Today, we’re looking at a company that’s leading the “cord cutting” trend…

Regular readers know we love investing in big, secular trends. Right now, more households are abandoning traditional TV packages for lower-cost streaming alternatives like Hulu, Netflix, and Amazon Prime Video. And one company is riding this tailwind…

Roku (ROKU) is a leader in cable alternatives. Its Roku TVs have built-in streaming capability – but it also sells separate devices that turn any TV into a streaming machine. Importantly, users can reach all their streaming services from a single screen… And that makes Roku one of the easiest streaming platforms to use. Today, Roku has 22 million active accounts (beating every cable company except Comcast and AT&T).

As you can see in the chart below, ROKU has soared more than fivefold since it went public on September 28 last year. The stock recently hit a new 52-week high. As more folks ditch cable for cheaper streaming services, this huge rally will likely continue…

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