There haven't been many times in my career that the consensus was so clearly dead wrong...

When you find a contrarian opportunity, you'll usually feel some doubt. After all, you're betting against what most investors expect. It's never a sure thing that you're right and the market is wrong.

But when it came to the U.S. housing market, the opportunity was obvious.

Everyone thought higher mortgage rates would crash the housing market. But I saw the exact opposite...

Rising rates and falling affordability were irrelevant. Instead, we had a systemic undersupply of homes. And that meant prices couldn't crash.

This was the contrarian view over the past few years... And it turned out to be correct.

That didn't mean the housing market was healthy, though. Except for prices, the state of U.S. housing was a mess in every way.

But now, some of those deeper issues may be improving. And that means we'll likely see more good news for housing in the coming years.

Supply and demand made it obvious that housing prices wouldn't crash...

A decade of underbuilding had left the market millions of units short of demand. Inventory hit the lowest levels on record. So prices didn't budge – even while home sales collapsed.

Of course, that still wasn't a healthy market. It's much better over the long term to have enough homes available for a steady supply of sales. But now, we're finally taking steps toward that healthy environment...

That's because existing-home sales are starting to come back. They spiked 9.5% in February. And while they pulled back slightly in March, that was one of the largest one-month jumps on record. Take a look...

This move was significant. Existing-home sales collapsed over the past few years... And the lack of inventory kept prices propped up.

Now, though, sales are finding a bottom. That's a promising sign for the market's health.

A 9.5% jump in just a month is rare, too. We've only seen three other rallies that large... December 2015, June 2020, and July 2020. And those were darn good moments for the housing market.

This surge was possible for an important reason: The supply story is finally changing...

Slowly but surely, housing inventory is beginning to recover. You can see it in the chart below...

The worst time for housing inventory was in early 2022. Fewer than 1 million homes were up for sale back then.

We haven't seen a massive increase in homes on the market. But supply has been on a steady move higher in the past two years.

Combined, these two signals tell us that housing is beginning to improve. More homes are available for sale... and more homes have been selling recently. That's what we want to see.

U.S. housing still has a long way to go. It's still nowhere near the more normal, pre-pandemic market.

But as the fundamentals improve, it's setting the stage for a healthier market... And that should support higher prices in the years to come.

Good investing,

Brett Eversole