Steve Sjuggerud has urged readers to invest in housing all year… We’ve written a lot about Steve’s opinion on housing. He described his thesis in this February essay in our free e-letter DailyWealth…
The basic story is that housing is an incredible value right this moment: With mortgage rates at record lows TODAY (at 3.87%) and with a record “bust” in home prices, housing is more affordable than ever. PLUS, we’re at the “puke” point – where banks are giving up properties at any price, just to get rid of ‘em. PLUS, the government is getting in on the act, trying to help.
Steve shares this opinion with some of the best investors in the world. Earlier this year, legendary investor Warren Buffett told the world, “Single family homes are really cheap now.” Yesterday, news broke that billionaire hedge-fund manager John Paulson bought 875 acres of a resort community near Las Vegas for $17 million. He’s been buying lots of raw land in his Paulson Real Estate Recovery Fund.
The data is supporting Steve’s thesis… Homebuilder sentiment is soaring. Prices are increasing. And sales volumes are increasing. For example, in June, Bloomberg reported home prices in Phoenix, Arizona (one of the worst-hit U.S. housing markets) had increased at a 26% annual rate in the three months ended in April. And purchases jumped 43% in April from a year earlier. The inventory of previously owned homes for sale in Phoenix fell 54% in April from a year earlier.
Today, a slew of bullish housing news sent homebuilder stocks soaring. On CNBC, Spencer Rascoff, CEO of online real estate marketplace Zillow, said real estate had bottomed… “So five years into the housing recession and down 25% from the peak, we are finally at a bottom,” Rascoff said.
The North Jersey Record newspaper reported railroad giant Union Pacific was taking railcars from storage for the first time in four years to transport lumber for homebuilders.
North American rail carloads of wood and lumber were up 10% this year through July 28 compared with the same period last year, according to the Association of American Railroads. That’s compared with a 1.4% drop in total carloads.
“The expectation is for continued growth in construction-related activity, whether it’s lumber or aggregates, to help support rail volumes in 2013 and beyond,” said Ben Hartford, an analyst for the asset-management and private-equity firm Robert W. Baird & Co.
Analytics firm CoreLogic released its monthly report this week on its Home Price Index. The June numbers mark the fourth consecutive increase in home prices on a year-over-year and month-over-month basis.
“At the halfway point, 2012 is increasingly looking like the year that the residential housing market may have turned the corner,” said Anand Nallathambi, president and CEO of CoreLogic. “While first-half gains have given way to second-half declines over the past three years, we see encouraging signs that modest price gains are supportable across the country in the second half of 2012.”
Thanks to Stansberry & Associates for this post, and to 401kcalculator.org for the image.
For more interesting reads about real estate investing, check out How To Add An Extra Million to Your Retirement Plan and Return of The Investors… Return of The Market!