In a recent DailyWealth, Steve Sjuggerud wrote about the possibility we'll see "a decade of renters" following the real estate crisis. His friend Justin Ford, a Florida real estate expert, gave these three reasons for this phenomenon...
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1) Millions have walked away from their homes or lost them to foreclosure, so they are now renters. |
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2) When houses were soaring, most people thought it was a great time to buy. Now that prices have been plunging, they think housing is a bad investment. |
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3) Many of the few who do recognize the compelling values still will have to rent for a while because they've had a recent foreclosure or credit problems and won't be able to qualify for a mortgage for a while... |
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Until last week, I hadn't thought much about this potential in the rental market. But all these ideas make sense to me... |
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This could be the decade of renters, whether it's families that are now out of their homes, like my friend... or first-time homebuyers who now choose to rent instead of buy. – Steve Sjuggerud, March 28, 2011, DailyWealth |
In the first quarter (a normally slow period for rentals), U.S. apartment vacancies dropped to 6.2% from 8% a year earlier and 6.6% in the fourth quarter of 2010. Apartment construction has climbed from a 50-year low on expectations more people will rent. "There's a bias against homeownership at this point, especially if you feel home prices won't rise and you can wait," Victor Calanog, chief economist at Reis, a commercial real estate research firm. "Most of the applications for construction and building loans are for multifamily buildings."
Apartment owners had a net increase in occupied space of more than 44,000 units, the most for a first quarter since 1999 and almost double what we saw a year ago, according to Reis. And only 6,000 units came to market during the first quarter, the fewest since Reis began collecting data in 1999.
Effective rents – what tenants actually pay – jumped in 75 of the 82 markets Reis tracks, to an average $991 per month from $967 one year earlier and $986 in the fourth quarter of 2010. Landlords' asking rents increased to $1,047 from $1,027 a year earlier.
As we said in a previous Digest, owning apartment buildings outright is the best way to play this trend. The capitalization rates, which are calculated as net operating income over the price of the property, are nearly double in private markets compared with real estate investment trusts (REITs). And you can find the best deals in second-tier cities like Atlanta, Georgia and Charlotte, North Carolina.
Fed Chairman Bernanke's comment that he was watching inflation "extremely closely" roiled the precious metals market yesterday. Gold hit a record price yesterday... And it hit another today, reaching $1,463.70 per ounce. And the fact that the government may shut down in the face of budget talks is only helping the bull case. Inflation is already a certainty in our economy, but without massive cuts to entitlement and defense spending, the situation will only get worse.
With silver hitting a 31-year high yesterday, two of our silver recommendations reached 52-week highs – Silver Wheaton (SLW) and iShares Silver (SLV). These two stocks are the stalwarts of the silver industry. iShares Silver is simply a proxy for bullion. Silver Wheaton is a $16 billion silver royalty company (meaning it collects cash flows from operating silver mines in return for initial funding). When silver gets popular, the hot money flows into these stocks. You can make a lot of money owning these. True Wealth readers have made more than 65% in Silver Wheaton since October. But they're not the best way to get really rich in a silver bull market.
Longtime readers know the best way to get rich in a silver bull market (or any commodities bull market) is to buy the little-known, high-quality junior resource stocks. We have analysts who scour the globe speaking with the most-plugged in junior resource experts to find the best opportunities for our readers. And their efforts paid off...
For example, Phase 1 readers made almost 600% on Matt Badiali's recommendation of ATAC Resources and 450% on Paramount Gold and Silver... They're up more than 200% in silver mining firm Mirasol Resources. We've probably recommended a half dozen junior resource stocks that have more than doubled our readers' money. Normally, we only recommend these stocks in Phase 1 – our most exclusive and most expensive service at $5,000 a year – because they're illiquid small caps. Only a small number of investors can buy the stock without "blowing it up."
But Frank Curzio recently recommended a junior silver stock in Penny Stock Specialist (which only costs $39 for the first year). He calls it "the best silver stock you can buy right now." Our editor in chief Brian Hunt e-mailed me today saying this stock could explode. We think you'll at least double your money here. If silver continues soaring – which we expect to happen – you could make five or 10 times your initial investment. Of course, junior mining stocks are risky. But this is the type of opportunity where you can invest a small amount of money and walk away with a fortune. To sign up for Penny Stock Specialist and receive Frank's silver pick, click here...
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New 52-week highs (as of 4/6/11): First Trust Dow Jones Select MicroCap (FDM), Cambria Global (GTAA), Silver Wheaton (SLW), Hershey (HSY), iShares Silver (SLV), SVB Financial (SIVB).
Porter takes on two insightful questions in today's mailbag... Send your feedback here... feedback@stansberryresearch.com.
"My relatives still live in Norway and I visit there frequently. Here's my take on the country. It is breathtakingly expensive for anything there – cars (3 times USA cost), food, alcohol, housing etc. Socialism in Norway allows laggards in the workplace to make as much money as a person who works hard and diligently. My cousin, who is a school teacher, complains bitterly about this kind of inequity in the workplace. As the one fellow said yesterday, the reason it works (for the main part) is that there are only about 5,000,000 people in the country. Can you imagine what would happen here (with 320,000,000 people) if the whole country was a socialist state? It's bad enough now where there are still entities that are basically socialist in nature (i.e the post office, government unions, private labor unions, etc.). And furthermore, most US companies are in the 80 20 state, that is, 80% of the work is done by 20% of the work personnel. We can't even agree on a budget in Congress or at the State level. Yes, Norway is beautiful and I love to see my relatives, but I wouldn't live there on a bet. The devil I know (the USA) is still one of the best places in the world to live in." – Paid-up subscriber Hans Waagen
"Here's a perhaps dumb question that's puzzled me for sometime. In your subscriber feedback section, all of your subscribers refer to themselves as 'Paid Up Subscribers' almost as if it were a badge of honor. My question is simply this: pray tell what OTHER kind of subscriber you have other than 'Paid Up' ie. I'm not aware that you can purchase your newsletters on an installment plan, or can you?" – Paid-up subscriber BJ Baker
Porter comment: Nope. We simply like to encourage folks to be "paid up" at all times… for obvious reasons.
"I just signed up for the Private Wealth Alliance and have been combing through all of the resources. At first I balked at paying $1500, but from SIA, Penny Stock, and the other publications that you send me, I had made 20x the $1500 on things I would have never done on my own. So in that sense, it was a no-brainer.
"One suggestion that I would make is to publish a calendar that shows the release dates and times of your research. Sometimes reading things 3-5 days after the fact, you miss the early move on recommendations. While that is a trading perspective, the market is moving awfully fast and the early bird gets the worm." – Paid-up subscriber Thomas Young
Porter comment: The schedule is on the very top of our website.
"I'm new to your advisory and was interested in learning how you would invest $200K (in USD) beforehand to profit before a hyperinflationary event? Historically speaking, how long do hyperinflationary events usually last? What do you feel is the biggest 'sucker's investment' to avoid before or during a dollar collapse/hyperinflationary period? What would you do if you owned a home (free-and-clear) in the US right now? Would you sell it and rent or stay put and ride it out until things returned to a new normal and sell then? Obviously a step-by-step plan entitled 'How To Survive The Collapse of the Dollar and a Hyperinflationary Event' would be ideal to have or has S&A already developed this product?" – Paid-up subscriber Ryan H.
Porter comment: Seriously? Have you read any of my newsletters?
Regards,
Sean Goldsmith and Porter Stansberry
Baltimore, Maryland
April 6, 2011
A nation of renters... Public versus private real estate investments... Gold and silver hit new highs... Our favorite silver stock today... Government shutdown...