Real Estate: It’s Time to Buy Again

Forget stocks. Don’t bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing. This is a VERY IMPORTANT read.

Palm Coast, FL – March 29, 2011

From his wide-rimmed cowboy hat to his roper boots, Mike Castleman fits moviedom’s image of the lanky Texas rancher. On a recent March evening, Castleman is feeding cattle biscuits to his two pet longhorn steers, Big Buddy and Little Buddy, on his 460-acre Bar Ten Creek Ranch in Dripping Springs, a hamlet outside Austin in the Texas Hill Country. The spread is a medley of meandering streams, craggy cliffs, and centuries-old oaks. But even in this pastoral setting, his mind keeps returning to a subject he knows as well as any expert around: the housing market. "I’m a dirt-road economist who sees what’s happening on the ground, and in 35 years I’ve never seen a shortage of new construction like the one I’m seeing today," declares Castleman, 70, now offering a biscuit to his miniature donkey Thumper. "The talking heads who are down on real estate will hate to hear this, but America needs to build a lot more houses. And in most markets the price of new homes is fixin’ to rise, not fall."
Castleman is in a unique position to know. As the founder and CEO of a company called Metrostudy, he’s spent more than three decades tracking real-time data on the country’s inventory of new homes. Each quarter he dispatches 500 inspectors to literally drive through 45,000 subdivisions from Baltimore to Sacramento. The inspectors examine 5 million finished lots, one at a time, and record whether they contain a house that’s under construction, one that’s finished and for sale, or a home that’s sold. Metrostudy covers 19 states, or around 65% of the U.S. housing market, including all the ones hardest hit by the crash: Florida, California, Arizona, and Nevada. The company’s client list includes virtually every major homebuilder and bank — from Pulte, and KB Home to Bank of America and Wells Fargo.
Full Story >>>> Fortune []
Toby’s Commentary: I hope you read the full story. It will prove to be most prescient. Optimism is nice, but optimism fortified with facts and sound logic is better still. The underlying logic of shrinking inventory is fortified by a report to the National Association of Homebuilders Executive Committee which my latest newsletter summarizes. [The newsletter also contains a link to the NAHB report]
The own vs. rent metric continues to shift too. In an increasing number of locations it is becoming less expensive to own than to rent. Meanwhile mortgage interest rates remain near historic lows.

2 replies
  1. Dave
    Dave says:

    More "pro-real estate" BS

    I can’t believe all the feel good articles and comments on why now is a time to buy homes/real estate. Just like the government is "trying" to make people feel good about the lousy economy, anyone involved with a business that involves real estate is trying everything to make the "unsuspecting sap" make the leap back into buying homes/real estate. The rationale is that the prices are so low that it must be a great buying opportunity. DON’T DO IT!!! It is the biggest TRAP for the "gullible"!!! YES, real estate will be a great bargain sometime in the future, but, that time is not now!!! With unemployment sky high and a "shadow inventory" almost twice what the market inventory is, real estate prices still have a ways to fall. No real recovery ever occurred without real estate leading the way, this "phony recovery" is just that and it will not last or be sustained. There are too many problems with our economy, too numerous to go into here, but, the only one that matters is that buying is still very risky and renting is safer. Even if we have hit a bottom, which I don’t believe that we have, the rise in value will not outstrip the coming severe inflation. We need to sort out our more pressing economic problems before real estate will be a great buy again!!!

  2. Bob
    Bob says:

    Not Yet

    We have not hit bottom yet and I would not even attempt to guess when we will bottom out. I would read the article at the link below before I would recommend to anyone to buy. My livelihood is based in the homebuilding industry and would love to think everyone should buy, but in good conscience I could not recommend it to anyone at this time.

    Unfortunately I believe we have a long way to go.

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