In 2011, I personally "backed up the truck" to buy Florida real estate.
To this day, Florida real estate (not including my home) makes up the largest percentage of my investable net worth.
I have been optimistic on housing ever since. So you might be surprised to hear that I am not always bullish on U.S. real estate...
I raised the alarm on the housing market in 2005. We were in a dangerous bubble, and I told readers that it couldn't last.
When the environment in real estate turns dangerous again, I'll be happy to sound the alarm. But let me be clear...
That's not what's happening today.
Part of the reason is what I explained in yesterday's DailyWealth essay. Thanks to low interest rates, the relative value of housing is incredibly attractive.
There's more to it though, as I'll explain today. And there's a simple way you can profit from what's going on.
Let me explain...
The reason I'm still bullish on housing is simple... supply and demand.
In a bad housing market, supply overwhelms demand. Prices fall when the housing market is overflowing with houses.
We aren't at saturation levels right now. In fact, we are far from it.
One way to see this is through the monthly home supply in the U.S. It measures how many months it would take to get rid of the current housing supply at current sales rates.
In January, the monthly U.S. home supply was five months. Today, it hovers around six. Take a look...
Supply has jumped up a little. But it's nowhere near saturation levels. We've seen monthly home supply jump to double digits in the past.
At six months, the current month's supply is hovering right around its long-term average.
This is a positive factor for companies that build homes. Supply remains in check. And we're not going to see a flood of new supply anytime soon...
That's because housing starts are down dramatically since the coronavirus outbreak began. They're down 45% since the January peak... And they have now fallen to recession levels. So we are about to have a severe shortage of new homes.
Of course, coronavirus is also going to slow demand. But with supply down so much, homebuilders are in a better spot than you might think.
It's true that when the virus hit the U.S., these stocks crashed with the broader market. Homebuilders fell 51% peak to trough from February to March.
That's right – the sector at the heart of a housing boom lost half of its value in roughly a month.
For folks who owned homebuilders, it was a painful loss. But the rally in recent weeks has been just as powerful... The sector has soared roughly 80% from its recent lows.
Combine that with the fantastic relative value in housing... as well as the supply and demand positives... and it makes one thing clear.
Housing is a smart bet today. And owning the homebuilders – the companies that drive the housing market – is a smart bet, too.
Good investing,
Steve
P.S. I've been investing in real estate heavily over the last decade. The opportunity has been incredible. And it's still incredible. That's why I'm hosting an event next week to unveil the fantastic setup I'm seeing now... and to share the secrets I've used to make millions in the real estate market. The event is free to attend. But you have to sign up ahead of time. To do that, click here.
Further Reading
"You and I make choices with our money every day, based on relative value," Steve says. With any purchase we make, we weigh its value against the value of something else. And even though it might not seem like it, we can see that housing is cheap today... Read more here: A Simple Truth of Investing... And What It Means for Housing.
Interest rates for home mortgages are at historic lows right now, and so is the supply of houses on the market. So if you're worried you've missed the upside, remember, prices alone don't make an unhealthy housing market... Get the full story here: It's Still Smart to Bet on Housing.
If you own just the major U.S. stock funds, you need to consider adding more exposure to real estate. And this strategy is a great way to do that today...
SUDDENLY, EVERYONE NEEDED THIS COMPANY
Today's chart shows a company that was in the right place at the right time...
When the coronavirus outbreak struck, health concerns shut down face-to-face interactions. Business owners, employees, and customers were staying home... Families couldn't visit each other... And houses of worship couldn't hold services. So they all turned to this company...
Zoom Video Communications (ZM) is a $67 billion host of online video calls. It didn't invent this industry, but it now dominates it... thanks to a simple interface and affordable pricing that are perfect for both private and professional use. Zoom shot up from a 10% market share last summer to 43% this spring – more than twice the share of the No. 2 competitor. And profits surged to $27 million in the most recent quarter... up from basically breakeven a year ago.
Since the company went public in April 2019 at $36 per share, the stock has exploded more than 550%... with most of those gains as a result of COVID-19 emerging a few months ago. Zoom has become a part of our personal and professional lives, and it's not going away anytime soon...
