Don't Lose Your Mind... This Is a Faux Mania

I know I might sound crazy...

After all, I'm betting on a multiyear boom when it feels like we're in the middle of mania.

As I explained yesterday, real estate is the one asset that would make me give up gold forever. And yes, that's true even given the wild times we've seen in real estate this year...

Homes just about everywhere are selling immediately, and above their listed prices. Many buyers, if they want a chance at homeownership, are being forced to waive their "safety nets" – like being able to back out based on an appraisal, or even setting foot in the home before putting an offer in.

It has created an even more hectic market than what I saw leading up to the housing crisis.

I doubt any of this is news to you.

But given all of those facts, you might wonder why I'm still so excited about housing... After all, we've experienced a decadelong boom already.

The answer is simple. While this might feel like a mania, it's actually perfectly rational. And it will likely last much longer than most believe...

It's economics 101...

Regular readers know I've been beating this drum a lot lately. But it's important to understand.

What's happening today isn't wild speculation like we saw in 2004. It's not folks quitting their jobs to "get rich quick" by flipping houses. It's all about supply and demand.

Right now, we have a ton of buyers entering the market and not nearly enough houses for them to buy. It's really that simple.

There are plenty of explanations for what's going on...

COVID-19 always gets some credit. It has forced folks around the U.S. to reprioritize their lives... And that means making big changes to where they live and what they do for work.

Also, the millennial generation is becoming crucial to the housing market... Millennials are now the largest generation of homebuyers, according to the National Association of Realtors. And younger millennials (ages 22 to 30) are almost entirely first-time buyers.

The chart below should be familiar to readers. New home sales hit their highest level in 15 years in January. But as we'll get to shortly, the imbalance here is even greater than you might realize. Take a look...

We've seen a decline in demand from the peak over the past few months – but you can see that new home sales are still up double digits compared to 2019 (before the pandemic). And they're up nearly 30% over the past four years.

Meanwhile, the number of homes available for sale has fallen dramatically over the same period...

This chart shows the number of active listings in the U.S. at any given time over the past five years. And as you can see, we're well below half the level from 2016.

Again, this paints a simple picture... Today's apparent housing mania isn't a mania at all. It's simply a massive imbalance between supply and demand.

That means the current housing boom is more sustainable than almost anyone realizes.

Homebuilders can't fill the supply gap overnight. That means the red-hot housing market we've seen can – and likely will – continue. And it leaves us with only one big question...

What are the best ways for you to take advantage of it?

There are two great answers to that question. And I'll share them in tomorrow's DailyWealth.

Good investing,

Steve

P.S. This decade could end up being the best in history for housing prices. But because of the faux mania playing out today, few investors realize it. I want as many folks as possible to profit from this trend... And that's why I put together a presentation explaining exactly what's going on, and which areas of the market will benefit most. It won't be up much longer... So watch it here while you still can.

Further Reading

"If I had to, I would give up gold forever and invest in this instead," Steve writes. Anyone that knows Steve knows that he wouldn't give up gold lightly. But one investment is likely to generate even bigger gains from here... Get the full story: The One Investment That Would Make Me Give Up Gold Forever.

"The pandemic unexpectedly kicked off some major economic trends," Chris Igou says. Folks are moving from big, expensive cities into cheaper parts of the country. And this could be the beginning of a major trend... Read more here: Why the Housing Boom Is Sure to Continue (in Certain Areas).

Market Notes
THE 'SHIFT TO DIGITAL' IS PUSHING THIS SEMICONDUCTOR MAKER HIGHER

Today, we’re highlighting a company that’s benefiting from the ongoing hunger for new tech…

Regular readers know we often cover ways in which the world is going digital… We rely on technology for work, food, entertainment, and everyday tasks. This means the tiny chips that power our devices are critical for our lives. And that bodes well for today’s company…

ON Semiconductor (ON) is a $20 billion global semiconductor maker. It focuses on powering green energy and energy-efficient technology, giving it a diverse customer base. Its chips are used in electric vehicles, solar energy grids, industrial automation, 5G, and cloud infrastructure. And ON Semiconductor is thriving off these tech trends… In the second quarter, the company posted a record $1.7 billion in revenue – up 38% year over year.

As you can see in today’s chart, ON shares are rising. The stock is up more than 110% over the past year… And shares recently hit a fresh all-time high. As the world increasingly relies on semiconductors in everyday life, this uptrend should continue…