Over at Yahoo! Finance, the headline for one of the most popular articles screams, “Housing Already Shows Signs of a New Bubble.” The exact same sentiment is being shouted from the rooftops at Forbes, too: “Home Builders Could Become Heartbreakers Again.” We’re less than one year into a legitimate recovery in prices, and already the pundits can’t help but sound the alarm about another possible “bubble”? Give me a break! Forget Rodney Dangerfield, the residential real estate rebound gets “no respect.” Don’t worry. We’re nowhere close to another peak. Nor has the profit potential for housing-related investments suddenly vanished. Here are 10 hard facts to prove it…
1. Too Far, Too Fast? Nope!
Housing market bears point to the meteoric rise of home building stocks as proof that the recovery has been too robust, too soon.
The S&P 1500 Homebuilder group is up 170% since hitting a low in August 2011. In the last year alone, many individual homebuilder stocks, like KB Home (KBH), PulteGroup Inc. (PHM) and Ryland Group (RYL), doubled in price.
As Bespoke Investment Group aptly points out, though, “Remember that ‘too far, too fast’ is relative.” And, in this case, short-term relativity can be deceiving. It turns out that the S&P 1500 Home builder group is still down 55% from its 2005 high, despite the impressive run-up over the last 18 months. Too far, too fast? I don’t think so!
2. Peak Activity? Nope!
Actual home building and sales activity haven’t peaked, either. Based on the January data, single-family housing starts remain almost 200% below the peak hit during the last boom. And they’re more than 60% below the long-term average since 1962. As far as existing home sales, we’re still about 40% below peak levels.
3. RFI is Back in the Black.
Ever since 2005, the real estate market has been a drag on the U.S. economy. More specifically, residential fixed investment (RFI) weakened GDP growth.
Not anymore! In the fourth quarter, RFI added 0.4% to GDP growth. In dollar terms, RFI needs to increase another 40% just to hit the long-term average since 1995. So forget being near a top. The latest data indicates that “the housing rebound is fairly entrenched at this point,” as RBS Securities’ economist, Omair Sharif, puts it. Entrenched… with plenty of room to run, too.
Home – Where your story begins…
To learn more about how Coldwell Banker Grass Roots Realty can help you buy or sell a home, please call one please call one of our four offices in:
Grass Valley Office at 530-273-7293
855 Sutton Way, Grass Valley, CA 95945
Nevada City at 530-265-3282
108 Union Street, Nevada City, CA 95959
Penn Valley at 530-432-1131
11364 Pleasant Valley Rd, Penn Valley, CA 95946
South County/LOP at 530-268-1575
10193 Combie Rd, Auburn, CA 95602