The Craze in Housing Isn't Fueled by Mania

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...

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

Further Reading

When housing prices take off, it's not just physical property that booms. There's a simple way to take advantage of this in the stock market... Read more here: Real Estate Stocks Are Poised for a Double-Digit Rally.

Supply and demand are absolutely crucial to the housing market. Right now, these fundamentals are completely out of balance. And that means home prices are likely to keep soaring from here... Get the full story: Why the Housing Boom Is Nowhere Near Over.

Market Notes
VIRTUAL LEARNING IS BOOSTING SHARES OF THIS ONLINE EDUCATOR

Today, we’re looking at a company that has been tackling a huge challenge during the COVID-19 pandemic…

Just as many adults spent the past year working remotely, many children have been learning from home as well. Much of the country is still debating when students should return to schools… And at-home learning may continue to be a part of our lives. Today’s company has found a way to make online learning work for students and teachers…

Pearson (PSO) is a $9 billion education-publishing company. It works to educate millions of students around the world – from pre-K through grade 12, as well as those seeking higher education. Demand for virtual schooling has been increasing over the years… And it took off during the pandemic. But the growth isn’t over yet… Pearson recently reported that quarterly sales for its global online learning segment went up 25% year over year.

As you can see, PSO shares have climbed an incredible 135% over the past year… recently hitting an all-time high. And with virtual learning here to stay, shares should keep heading higher…