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Wednesday, October 8, 2014

RESIDENTIAL REALTY REALITY. IT LOOKS LIKE NOW IS THE TIME TO BUY.

Earlier today, in AIN'T THAT AMERICA FOR YOU AND ME. TRUE PRICES OF RESIDENTIAL REALTY OFF ALMOST 50% FROM PEAK CREDIT, I revealed to you the true median price for new and used houses sold has fallen a whopping -48.6% falling at an annual rate of -9.1% a year over the last seven years. As well, the true median price for new houses sold has fallen an eye-blackening -47.1% falling at an annual rate of -7.9% a year over the last seven and three-fourths years.


Here are what prices have looked like during the reign of presidents beginning with Kennedy.




No one can say how long a price rise shall run nor how long a price fall shall run before either trends start. That said here are yearly growth or shrink rates and the time of the trend.



The average annual median price growth for low to peak periods is 5.9%. The average annual median price decline for peak to low periods is -6.5%.




Back in May, 2014, I shared with you the Homeless ratio. The Homeless ratio looks at net charge-offs in relation to delinquencies for all single-family residential mortgages secured by real estate and booked in domestic offices of all commercial banks. Back in May, the Homeless ratio signaled the residential realty mess as over.

And back in May 2014, I said from a house price perspective, this has been the best time to buy since 1980 though not the best time to buy relative to income. If you have the a solid income and have wanted to become a mortgage payer rather than a renter, the window is open for a once-in-a-34-year opportunity.

However, if you are looking to speculate in realty expecting the same kind of return you would get from buying the S&P 500 for price, think again.

As I showed in IS THERE EVER REASON TO BUY GOLD, had someone bought the True S&P 500 at $86.50 at the end of Q1 1994 and rode that until Q3 2000, that lucky one would have enjoyed a yearly growth of 22.3%, double the return of the great gold rush of the 2000s, with the total growth coming in at 251.4%. In the long bull run between Q3 1974 and Q3 2000, True S&P 500 grew at a yearly rate of 7%, growing a full 484.3%.

So even in the best runs for true median price of new sold houses, buying at the low of residential realty can't compete with buying at the low of the S&P 500.