My friend, many investments are cheaper than you can imagine right now...
There's so much investing opportunity today, I hardly know where to begin!
"Steve, have you lost your mind?" you might be thinking. "You know that we're in a pandemic... that stock prices are at new all-time highs... and that house prices are now above their 2006 peak... right? So how can you possibly say that these investments are cheap?!"
You're asking the right questions, of course...
How can houses be cheap when they are selling at all-time highs? I realize it sounds like a ridiculous thing to say. And how can stocks be cheap when they're almost back to their highs, too?
I'll cover it all today. And hopefully you'll walk away feeling like I do... darn excited.
I've told this story in DailyWealth before. But I keep telling it because, honestly, I know a lot of folks have a hard time believing me.
If that's you, then please hear me out today. Because this is darn important for us going forward.
If you buy into what I'm talking about, then you will have a huge advantage over your peers in your investments...
You will have conviction that you are doing the right thing... And best of all, chances are great that you will make a heck of a lot more money than just about anyone you know.
There's a crucial detail that tells us that investments are darn cheap today: interest rates.
We have record-low interest rates, which benefits companies (and their stock prices). And we have record-low mortgage rates, which benefits the housing market.
Let's stick with the housing idea for today...
The truth is that most people don't buy a house based on its sticker price... They buy it based on its monthly payment.
So I built a revealing chart. And it's one you likely haven't seen before. It's based on the simple idea that mortgage payments are critical in determining the "fair value" of the median house in America.
Three things are included in my fair-value calculation (all adjusted for inflation):
- The median house price in America.
- The median income in America.
- Mortgage rates.
The result is fascinating...
In the 1980s, when mortgage rates were sky-high, houses were expensive based on my chart.
After that, interest rates went down, and by the 1990s, housing was fairly priced. Then the housing boom took hold, and by 2006, house prices were overvalued.
But the most fascinating part of all of this is what's happening today. Take a look...
You can see from the black line that house prices bottomed in 2011. That makes sense. Home prices had been crashing for years at that time. And since then, they've soared again.
That boom in house prices is what has people worried about real estate now. House prices have gone up so much, people think they can't go up much further.
But look at my "fair value" line today, in blue above...
Thanks to record-low mortgage rates, the fair value of houses in America today has actually gone up faster than house prices have gone up. The typical home in America is underpriced by about $75,000!
You've heard me say for years that the largest part of my financial portfolio is in Florida real estate. Now you see why. I'm putting my money where my mouth is on this trade.
Higher interest rates would, of course, make houses less of a "value." But we are not there yet. And with the COVID-19 recession, higher interest rates are still a long way off.
As I said recently, the Fed is going to do all it can to stimulate the economy, with the tools it has always relied on – and that means we are in for lower rates for a long period of time.
That's it, my friend. That's the thing that matters most in the market today.
We have record-low interest rates. And that makes housing a better deal than you can imagine. So if you're in the market to buy a home, don't put it off... You want to act now.
Good investing,
Steve
Further Reading
"I've only sought out real estate deals when the environment was right," Steve says. The "right" environment starts with interest rates... But it doesn't end there. Learn Steve's three universal rules for succeeding in the housing market right here.
"Investing is all relative," Steve explains. If you look at the prices alone, U.S. housing might look expensive today. But the relative value is much better than it appears... Read more here.
Before the housing bust, you couldn't make an investment like this. But that terrible crisis created an entirely new asset class...
THE PANDEMIC IS ACCELERATING THE HOME-IMPROVEMENT TREND
Today, we're highlighting a company that's thriving as people spruce up their homes...
When the coronavirus lockdowns began, a lot of folks figured there was no better time to finish odd jobs around the house... And that trend has continued as economies reopen. Houzz, a platform that connects homeowners with design and remodeling professionals, reported a 58% jump in project leads in June. This surge in demand has boosted today's stock...
Lowe's (LOW) is a $115 billion home-improvement retailer. It boasts nearly 2,000 stores across the U.S. and Canada, where customers can buy anything they need to fix up their homes. And it got a huge boost from the pandemic. In the company's first quarter, Lowe's reported sales of $19.7 billion... up roughly 11% from the same quarter last year. And the company's online sales surged more than 80% in the quarter.
As you can see in today's chart, LOW shares are soaring. The stock is up nearly 140% from its March low, and it recently hit a fresh all-time high. As long as people keep investing in their homes, this stock should continue higher...
