Check out this chart of M/I Homes, a homebuilder stock:
It was one of our original picks in my premium service, The Signal.
We rode that for a 52% gain when everyone thought the U.S. was heading for a deep recession.
But not me.
And of course, things were unsteady for a while… but the housing market is still resisting the naysayers… just as I expect it to at this stage of the 18.6-year real estate cycle.
In short, you shouldn’t be worried yet. Here’s why.
Share of Mortgage-Free Homes Soared
In a sense, what we have right now in the U.S. housing market is the opposite of 2007.
Back then, homes were financialized through obscure products that even their creators didn’t understand.
Right now, it’s as simple as it gets.
More people than ever own their homes.
No mortgages repackaged into multilayered debt obligations… no derivatives on top of complex assets…
More people than ever own their homes outright.
The share of US homes that are mortgage-free jumped 5 percentage points from 2012 to 2022, to a record just shy of 40%. More than half of these owners have reached retirement age. Freedom from mortgage debt gives them the option to age in place—or uproot to sunnier climes.
And whatever path these homeowners take, it will be good for the markets.
If they keep living in their homes, the U.S. housing supply will remain tight, and prices will stay high.
If they downscale, they will go back to the market, buy something smaller, and have extra liquidity available. They might either spend it, which will help the economy, or invest it, which will continue to support financial markets.
In other words, whatever these homeowners do will keep the 18.6-year cycle going.
And Where Will It Go Next?
The cycle continues as I expected it to.
In fact, it has just entered one of the most exciting stages, which I call the “Eleventh Hour.”
At this stage, markets go up, following real estate prices… the economy grows, and investment opportunities abound.
That’s where we are right now.
What’s next is more growth for both the economy and the markets… and then the cycle will turn.
But I don’t see any signs of an immediate turn. The U.S. economy is firing on all cylinders, inflation is going down, and markets are happy.
With so much liquidity in the system and household balances in great shape (the latest numbers on mortgage-free homes are a case in point), I don’t see anything that would keep me up at night.
It’s time for you to use this unique opportunity and join my The Signal readers to learn which specific plays are on my radar.
Editor, Cycles Trading with Phil Anderson
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