I see more and more signals telling me where the U.S. markets are headed next.
I have brought a few of them to your attention recently.
However, it does look like it’s just the beginning.
And I’m not trying to read the market’s “mood” to understand where it’s headed.
Because in markets, sentiment is a funny thing.
Listening to the market too much will lead you everywhere and nowhere. And I am always amazed at just how quickly it can change one way or the other.
The key, however, is how you interpret what you read and hear.
If It Bleeds, It Leads
You may have heard recently about yet another Chinese property developer in strife…
How do you feel about it?
Have you got caught up in the emotion and negativity of the headlines?
If you did, I can’t blame you, frankly.The media are now experts on this type of, “if it bleeds, it leads” reporting.
But I see the world through the lens of the 18.6-year real estate cycle.
And I’m here to share my knowledge.
If you see learn to see things in this way, you’ll be ahead of 99.9% of market participants.
Here’s what I want to share with you this week…
The Credit Spigots Are Now Welded Open
I’m busy looking now for confirmation of an accelerating housing market in the U.S.
Because this is what over 200 years of U.S. real estate cycle history tells me to look for today.
If history repeats, this is where the money and the investment opportunities are to be found.
This is what interests me today…
Source: CNN Business
This doesn’t surprise me at all.
Because the real estate cycle says that if history repeats, then this rise in U.S. land prices has years to run.
That’s right: years!
Here’s another fact I found as I was doing research for my book, The Secret Life of Real Estate and Banking, on this subject.
Every 18.6-year real estate cycle is bigger than the previous one.
And what’s one of the biggest driving factors behind this?
Ever-easier access to credit.
This is the time when rising land prices encourage banks to step in and really send things completely over the top.
The boards of these listed bank companies demand it. Their shareholders demand it.
Now, a few of you reading this may have cottoned on to something here.
“But Phil, if house prices continue to rise, how does the average working family ever hope to save up the required deposit, let alone meet the monthly mortgage payments with such high interest rates?”
My answer is this: What is the cure for high prices? Even higher prices!
No one in this country wants to see the wealth effect of rising home prices to stop. They must keep rising.
And yet the problem remains of how to get in…
Enter the Banks
The race is now on amongst the country’s biggest mortgage lenders to grab market share. And this is how they intend to do it.
Source: Fox Business
Nothing like a little bit of history repeating. And right on time, too, I might add.
Here’s your answer. Amend the deposit and serviceability requirements to allow normal folk to enter the property ladder while land prices continue to rise.
In other words, the best of both worlds. Homebuyers win because they need less money for their down payment, and banks win because they will finance a larger share of the mortgage. For them, more money lent means higher total interest income.
And as prices continue to climb higher, thanks to initiatives like Zillow’s, even more people will be able to afford to buy.
This is the real estate cycle. This is it turning before your very eyes.
Editor, Cycles Trading with Phil Anderson
P.S. The only question left is: How can you navigate these markets calmly?
Well… for over 30 years I’ve forecast every turn in the markets… both up and down. I use a series of tools to do this.
And my mission is to teach others how to do this as well… check out how right here.
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