New Home Sales ‘Soaring’ and ‘Surging,’ With More Gains to Come

Original Link : Daily Wealth

“U.S. New Home Sales Soar to Highest Level in a Decade,” USA Today reported last week.

“New Homes Sales Growth Surges to 25-Year High,” the Wall Street Journal said.

So which is it? Are new-home sales the highest they’ve been in a decade… or in 25 years?

It turns out, the answer is BOTH…

The number of new homes sold last month reached 667,000 – the highest level since October 2007, a decade ago, during the last housing boom.

Looked at another way, though, new-home sales jumped by 18.9% – the highest monthly sales growth in 25 years.

Why did so many new homes sell last month? The hurricanes likely played a part.

But to me, the big factor in the housing market is the low supply of existing homes for sale.

It’s Economics 101 – when you have no supply and a ton of demand, prices go higher.

Specifically, housing supply is measured in months – that is, how long it will take for the existing inventory of houses to sell at the existing rate of sales. Right now, we’re sitting at 4.2 months of supply.

It is rarely lower than this… In fact, over the last 20 years, it was significantly lower only once – in early 2005. That was during the final years of the last great housing boom in the U.S… And house prices REALLY soared after that.

I expect the low supply today will create a similar effect – dramatically higher home prices.

The average sale price of new homes hit an all-time record last month, at $385,200. The median price for new homes was $319,700.

Keep in mind, new homes are only a fraction of the housing market. And the average home price is always higher than the median home price… For comparison, the median price of existing homes sold last month was $246,800.

But with scarce supply, that means we have plenty of upside ahead.

Higher house prices have been part of my big theme for the last eight years… Since then, I have said:

Interest rates will stay lower than you can imagine, for longer than you can imagine… And that will push asset prices, like stocks and real estate, higher than you can imagine.

The “Melt Up” is arriving in stocks, driving stock prices to new heights as the bull market enters its final phase. And now, the boom time is arriving in the housing market, too…

I believe we still have plenty of upside potential ahead… You haven’t missed it yet in housing.

Good investing,

Steve

Editor’s note: Steve just recommended a “one click” way to profit from this trend in his True Wealth advisory. This investment lets you own a stake in tens of thousands of rental homes – in some of the best markets across the U.S. Better yet, more than 25% of this real estate is in Florida, where Steve is most bullish today. To learn more about True Wealth – and how to access this recommendation – click here.

 

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About the Author: Daily Wealth

Dr. Steve Sjuggerud is the founder and editor of one of the largest financial newsletters in the world, True Wealth. Since inception in 2001, True Wealth readers have made money every year with safe, contrarian investment ideas.

Steve did his Ph.D. dissertation on international currencies, he’s traveled to dozens of countries looking at investment ideas, and he’s run mutual funds, hedge funds, and investment research departments.

Steve’s investment philosophy is simple: “You buy something of extraordinary value at a time when nobody else wants it. And you sell it at a time when people are willing to pay any price to get it.” It’s harder than it sounds, but Steve continues to be able to do just that for his readers.

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