It was a once-in-a-decade event…
In February, prices of existing homes fell compared to their 2022 level.
It wasn’t much of a fall… even though this hasn’t happened in 11 years.
With mortgage rates back to some sort of historical norm (around 6% as of February), potential home buyers are hesitant to hit the bid.
I get that.
But there are two reasons why I see the number of home sales falling… and then home prices going back up even more…
Home Prices Haven’t Peaked Yet
There are two things helping potential homebuyers…
First, existing homes available to buy remain low.
This should support prices for months, if not years, to come. Definitely until the end of this 18.6-year cycle.
In fact, resale inventories are still falling. And the reason is simple.
Existing homeowners aren’t willing to sell.
Around this time of the year, there are usually about 100,000 new listings available each week in the U.S.
This year, the number is closer to 80,000, and has consistently stayed low for months.
Think about it. If you’ve got a fixed-rate mortgage at 2-3% from the last couple of years, are you going to sell anytime soon?
Probably not…
Second, the supply of new homes is falling. Builders seem to be finishing more homes than they are starting:
Homebuilders remain cautious, given the “uncertainty” that they operate under… higher interest rates… and the panic that the mainstream financial media has been stirring this year.
Builders are finishing their existing projects faster than they are starting new ones. This tells me that soon they will complete every single home in their pipelines, and future home supply will drop dramatically.
Extreme Bullishness Still to Come
This, again, is supportive of home values in this market going back up. It means this is a good time to buy, regardless of whether you’re buying a previously owned home or a new one.
Bloomberg says to “…expect another inventory crunch in the new-home market by the middle of 2024.”
An inventory crunch would send a visible sign to everybody that the housing market is tight.
I predict extreme bullishness in the market around that time. That’s when everybody will start thinking that they simply cannot lose by investing in property.
Money will pour in like never before… and like it always does in the 11th hour of the 18.6-year cycle.
The real estate cycle is playing out perfectly.
Before everybody else realizes that there’s still money to be made in the housing market right now… while the rest of the investing crowd is looking elsewhere…
Stay focused and follow the cycle. We haven’t seen the peak yet.
Regards,
Phil Anderson
Editor, Cycles Trading with Phil Anderson
P.S. If you follow the 18.6-year cycle, you’ll know when the right time to buy a home is… and how to get into the “right stocks at the right time.”
We’ve entered a period of the real estate cycle in which the greatest gains can be made… if you’re prepared for the market’s moves.
I recently launched a brand-new newsletter to give you specific plays that do well in each part of the cycle, so you can build (or rebuild) your wealth.
Check it out right here.
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