The Falling Supply Of Homes Leads To Rising Prices… And Falling Sales

Did you watch my video two Fridays ago? If not, check it out here. I explained how gold bugs are giving you dangerous advice about gold as an investment.

But gold isn’t the only investment that people mistakenly make because they’re told the wrong thing.

Real estate is another one.

In fact, I’d go as far as to say that buying real estate because its value “always goes up” is possibly even more dangerous than buying gold as a hedge during a deflationary season like the one we’re in now. That’s because housing becomes illiquid in the blink of an eye!

But, as usual, people get suckered into the real estate myth because they’re desperate to get something for nothing. They just don’t realize they’re about to be handed the bill…

In the last real estate bubble, we saw both rising demand and rising supply driven by ultra-strong demographics, falling interest rates, and ultra-liberal (a.k.a. idiotic) lending practices.

As I talked to you about recently, home sales and homebuilder stock prices peaked 26 months before stock prices did.

This time around we have a different scenario…

The Millennial demographics aren’t as strong as the Baby Boom and the environment doesn’t look as attractive for housing and appreciation prospects.

Plus, lending standards are tighter and mortgage rates have been rising since September 2017.

But there is something else going on…

Homebuilders have been much more conservative in building new homes. I’m not surprised after they got their asses whacked in the 2006 to 2012 bubble burst.

But to add insult to injury, older Baby Boomers are holding onto their homes for longer, which is exactly what I’d expect older people to do.

Both these things are limiting supply.

That’s caused prices to rise while mortgages are costing more.

This, in turn, has caused sales to fall…

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