This Real Estate 'Mania' Will Last Longer Than Most Think

A house that comes with free pizza... This real estate 'mania' will last longer than most think... The huge tailwinds for the housing market... The mainstream media still hasn't caught on... How to profit from the 'American Migration'...

In a tight, competitive market, a little incentive or attention-seeking can go a long way...

Our colleagues Steve Sjuggerud and Vic Lederman of True Wealth Real Estate have written to you recently in the Digest about the red-hot real estate market... and why they think it's not ending anytime soon...

With this in mind, we couldn't help but laugh at (and share) another slice of evidence this morning about the housing market...

Here's the deal... Buy this house in Franklin Square on Long Island in New York, and you'll get free pizza... (As anyone who is from or has been to Long Island knows, pizza and bagels are probably the two most sought-after foods there.)

It's a funny offer, of course – and you've probably heard of similarly-minded incentives like this in homebuying and selling negotiations over the last year or so – but that's the serious and emblematic point about the housing market today...

This little sign grabbed enough attention that the Long Island Wise Guy account on Instagram shared it with 132,000 followers.

Maybe the exposure (or heck, maybe the pizza) will lead to more people stopping by to take a look at the house... and therefore more potential offers. And maybe it will help drive up the price the owners are able to get for the sale.

The point is, you might think the housing boom can't keep going on...

But I (Corey McLaughlin) am here to tell you that it can – and will. And in today's Digest, I'll share what you can do to benefit. As Steve wrote on Thursday...

Home prices are up nearly 20% in the U.S. over the past 12 months. That's the largest one-year return we've seen in the past two decades, according to the S&P CoreLogic Case-Shiller 20-City Composite Home Price Index...

Homes just about everywhere are selling immediately and above listing price... And if they want a chance, many buyers are being forced to waive their "safety nets" – like being able to back out based on an appraisal or even setting foot in the home before putting in an offer.

Steve said that it has created a market even more hectic than what he saw leading up to the housing crisis – so much so that he doesn't blame anyone for feeling like it's complete mania in the space today.

But before you let the "mania" get the better of you, here's what he says everyone should know...

While this might feel like a mania, it's actually perfectly rational. And it will likely last much longer than most believe...

Why? Namely, as Steve has said and as we'll explore in today's Digest, there's "a massive imbalance between supply and demand." (He also followed up with a pair of Masters Series essays over the weekend. If you missed those, check them out here and here.)

I urge you to read those essays for the full picture because today, I want to briefly delve into this story...

To start, notice the caption of the above photo offering the free pizza with the house on Long Island: "I can't with this housing market smh." Whoever wrote that understands the market dynamics we're talking about... And that last part, "smh," is millennial-speak for "shaking my head." In other words, "I can't believe it."

And therein lies a nugget of useful information.

There is a big piece of demographic truth helping drive the housing boom today, too...

What is now the United States' largest living generation – millennials, those between the ages of 25 and 40 – is only just getting started buying homes... They need somewhere to live (besides their parents' basement) and a place to raise a family.

And more of them were increasingly beginning to do this...

Then the pandemic happened... interest rates went to historic bottoms... mortgages became cheaper than millennials had ever known... the new "work from home" environment meant people could move away from the office and out of cities... and those who could afford to bought homes.

The big picture is that demand is high. You likely see that all over the place. And as Steve and Vic said, on the other side of this economics 101 equation, the supply of new homes is low...

As Vic noted on Wednesday, jittery homebuilders simply walked away from new builds after the 2008 housing crisis. And new housing development floundered for just about 10 years, since builders didn't want to be left holding the keys to unwanted houses. As Vic wrote...

The National Association of Realtors ("NAR") believes the U.S. is short about 2 million single-family homes and about 3.5 million multifamily units.

Looking at the single-family homes alone, that's roughly $700 billion worth based on today's median home prices. And that's just to get us in line with where we "should be" today... It isn't factoring in future demand.

The result now? Prices of homes are going higher... The result in the future? Companies that do business in this sector will grow immensely...

From an investing point of view, this can make for great long-term investments in one of the largest parts of the American economy.

As we've said repeatedly over the last year, with money printing at all-time highs and the debt scoreboard adding many digits, this doesn't surprise us....

Anything that can be nailed down to the ground (like homes) or found in the ground (commodities) should rise in relative value measured in dollars. In other words, hard, in-demand assets will grow in value during inflationary times.

Throw in simple demographic and supply-and-demand trends, and you have a fundamental no-brainer. These aren't easy to find...

But while there's more room for this boom to run, this opportunity won't last forever either...

As Steve wrote in a new special report that he sent to True Wealth Real Estate subscribers earlier this month...

Folks, the real estate market is hot right now. It's time to act now... before the crowd realizes the upside isn't over yet.

That might be starting to happen (kind of)... Just today, splashed across the front page of mainstream financial news website CNBC.com was this picture and headline...

The basic information here is precisely the math we presented last week. CNBC also went on to describe our idea today about how millennials are driving this trend...

The U.S. Census found that 12.3 million American households were formed from January 2012 to June 2021, but just 7 million new single-family homes were built during that time...

"The pandemic has certainly exacerbated the U.S. housing shortage, but data shows household formations outpaced new construction long before COVID. Put simply, new construction supply hasn't been meeting demand over the last five years," said Realtor.com chief economist Danielle Hale. "Millennials, many of whom are now in their 30s and even 40s, have debunked the industry's 'renter generation' expectations."

But our key takeaway is different...

Numbers aside, the CNBC article noted that "builders can't make up the difference" because of ongoing supply-chain issues today. Single-family home construction is actually running at the slowest pace since 1995.

The article suggested that this is why stocks of homebuilders have been "trading significantly lower" over the past week...

That might be true, but here is why we love approaching investing as individuals rather than as a Wall Street firm married to quarterly results...

If you can afford to look past the short-term concerns, which we can do as individual investors, and have the patience and time to think about the long term, it's easy to see the investment opportunity here.

People who can afford a new home today want to buy a new home today... Problem is, there aren't enough of them. It's a simple as that.

And that's a recipe for higher home prices and profits for companies responsible for building them or the "picks and shovels" companies that supply construction equipment and tools that help those companies build homes.

For more on what we mean there, check out Steve's essay from last week, where he describes the three best ways to get involved in the real estate market today.

We've seen it over the last 15 months...

As Vic wrote last week, two homebuilding companies in our True Wealth Real Estate portfolio are up 70% and 53%, respectively.

Despite what many folks might think, this trend is not over... and we're far enough away from it ending that there is real value in putting this knowledge to work right now.

It's going to take years for the supply-demand imbalance to work itself out, and more opportunities will present themselves until then.

Today, if you're looking to time the real estate market, if nothing else, know that home prices are likely to head higher from here. And if you want to put new money to work today in this sector, Steve and Vic say it's a great move.

The thing about real estate though, as is often said, is that it's local...

That can make providing research on the real estate market to a broad audience difficult, but Steve and Vic have done it since launching True Wealth Real Estate last year.

In short, they put a lot of time into finding the companies and investment opportunities perfectly positioned to profit from the setup I described today.

In the latest issue of True Wealth Real Estate for example, Vic pointed out that many folks who are moving today are going where they can get the most bang for their buck... meaning low-cost, low-tax states.

As Vic wrote, noting his own move to Florida a few years ago...

It's a new "American Migration." And Florida is one of the top winners of that trend.

Since 2011, the state has had net inbound flows of new residents. So have Texas and Arizona.

Similarly, California has seen net outbound flows every year since 2013. And we see similar outbound patterns from other high-cost, high-tax states like New York, Connecticut, and Maryland.

Despite the rampant cynicism in the world today, people aren't dummies. They try to do the best they can for themselves... And that includes moving to high-quality-of-life, low-cost-of-living states.

He then recommended owning shares of a company "that moves America" – one that he believes is positioned for 1,000% upside as the real estate boom continues. Existing subscribers and Alliance members can view the issue here.

For everyone else, if you're interested in gaining access to this pick and all of Steve and Vic's real estate-focused research, be sure to check out this free presentation. In it, Steve explains more about why the real estate boom is his "No. 1 prediction for the 2020s."

He also explains why there's more to real estate investing than just buying low and selling high... why this "mania" is not a speculative bubble... and the one real estate idea he's "pounding the table" on that could send a handful of little-known U.S. stocks skyrocketing.

Don't miss it.

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With all the fundamentals in place for a higher gold price this year – low real interest rates, excessive money printing, decade-high inflation – what's been stopping it from shooting higher? John LaForge, head of real asset strategy for Wells Fargo, talks with editor-at-large Daniela Cambone...

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New 52-week highs (as of 9/13/21): Analog Devices (ADI), Asana (ASAN), Continental Resources (CLR), Cintas (CTAS), Denison Mines (DNN), Cheniere Energy (LNG), Palo Alto Networks (PANW), Procter & Gamble (PG), and VanEck Vectors Russia Fund (RSX).

In today's mailbag, a thought on yesterday's Digest and feedback on Kim Iskyan's Friday Digest about the financial cost of the War on Terror... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"Glad that Pelosi selected Nvidia. I've owned it for five years. More gains to come." – Paid-up subscriber Richard P.

"I would like to comment on Friday's article by Kim Iskyan. Several months ago, Kim wrote an article about our loss of soft power under the Trump administration. I would argue that our soft power has taken another hit under Biden, due to the manner in which we withdrew from Afghanistan.

"U.S. government spending has gotten way out of hand. We've reached a point in time where the U.S. government acts as though it has the ability to make the best decisions for all of its 332 million citizens. I would argue that no entity can successfully do that; we are each one of us unique, with our own skills, needs and interests.

"Kim states that, 'The opportunity cost of the War on Terror is breathtaking' and then goes on to repeat the same numbers I've seen in several other articles lately. Terrorism is not your traditional warfare and can't be fought by traditional means. Kim speaks eloquently of the opportunity costs of the war on terror and then goes on to comment that 'on the surface, it has worked' and 'even worse, the war on terror isn't a one-off expense'.

"Is this a business case for turning the other cheek? While I agree that the numbers cited are incredible, I would argue that not going to war also has a cost and, by and large, social programs are also not one-off expenses." – Paid-up subscriber Debbie J.

All the best,

Corey McLaughlin
Baltimore, Maryland
September 14, 2021