Forget about the economy!
Read the shocking news about Sex and Housing!
In spite of all you have heard in the media, in the grand scheme of things, demand for homes is not driven by the economy, or by jobs, or by interest rates, or any other such thing. The demand for homes is caused by SEX. Or to be more precise, the result of SEX – population growth. Let me explain what I mean. The population of the world is growing – doubling since 1967 to over 6.8 billion people. The population of the United States is growing as well, more than tripling during the last century and now totaling over 310 million. It is predicted that the United States population will reach 439 million by 2050.
According to CNNMoney.com, the rate of growth in population drives the formation of, on average, 1.3 million new households per year. That is 1.3 million new families on average that will need a place to live each and every year. Granted, the number of households being formed will slow down in a recession -- people start sharing apartments and graduates can’t find a job and move back home with mom and dad. But that won’t last. Any slowdown in household formation today will only contribute to pent-up demand tomorrow. That pent-up demand will come to the market sooner or later, probably about the same time a growing number of renters decide to take the plunge into home ownership. In fact, the longer we wait for the coming surge in demand, the more imminent it becomes and the stronger the turnaround will be.
In the boom years of 2003 – 2005, America was building nearly 2 million new homes per year. That number plummeted to 553,900 in 2009. This reduced rate of building will allow the market to quickly absorb any surplus of homes left over from the last boom. As soon as that surplus is used up, demand will increase.
Children born back in the 1980's are forming new households today and will do more to pull us out of this recession than any government stimulus plan. In fact, CNNMoney.com has predicted a coming housing shortage. I believe they are right, and I believe the first signs have already begun to appear.
No. Not in sales. People are scared to buy homes right now – and with good reason. Just review the headlines of the last four years. Rather, the coming housing shortage may be already beginning to reveal itself in the rental market. The occupancy rate for residential rentals at Countryside has soared to its highest point in years. A friend in the rental business recently reported a 97% occupancy rate across a 400-unit portfolio. People are having a hard time finding suitable rental housing. Some are asking to sign leases sight-unseen.
As soon as confidence in the economy begins to return, those renters will want to buy – not in a mad rush at first – but slowly and determinedly.
You might ask: What about the 1400 homes on the local market today? Well – just keep in mind that only empty homes enter into the equation. Every occupied home that is for sale (and that is the vast majority of those on the market) is only a sign that someone wants to change their housing arrangements. Those households will not disappear.
Wise men have said that housing leads us into recessions, and also leads us out of them. I believe that to be true. Just as overbuilding in 2004 helped lead us into the current slowdown, the lack of homes being built today will lead to increased demand, which will lead to increased production, and housing will once more lead us to prosperity.
At Countryside we believe this to be true. And we put our money where our mouth is (see below). We invest in housing in good times and bad.
By the way, now that you know the market is going to improve, you can begin to feel good about the future of our country and the future of our economy. And as long as you are in a good mood, start thinking about whether or not you can afford to miss this opportunity to own a new home. With prices good and interest rates at historic lows, today is a great day to invest in your future.
--Franklin Root
INVESTING IN AUGUSTA COUNTY AND WAYNESBORO
In the last few years, Countryside has continued to invest money in the local economy. We built a new section of road in Evershire, we purchased numerous rental homes and built even more. We just started one of the most exciting projects to hit Augusta County: Overlook.
Overlook is a 165-home community in Stuarts Draft that features lots of green space. We are in the process of building the first section of road and the first new home is scheduled to start soon!
EVERYBODY PAYS RENT
Everybody that lives in a home must pay rent. If you are among today’s growing rental community, you pay rent for a home – and that can be a good deal – until you realize that you are buying that home for the Landlord! Eventually, the Landlord will own that home. You, meanwhile, will own a shoebox full of worthless rent receipts. What a great deal … for the Landlord!
Think about renting the money instead! What would happen if you take the plunge, take out a mortgage and buy a home. Now instead of renting the home, you are renting the money! Eventually, you will own that home instead of a box full of worthless paper.
So rent the home, or rent the money. You pay either way! But ask yourself where you will be in 30 years if you choose to rent the home instead of renting the money.
LOCAL VS. NATIONAL
What is true in America is true locally. From 2000 to 2006, an average of 767 dwelling units per year were added to the supply in Staunton, Waynesboro, and Augusta County. In 2009, that number fell to 253. The evidence seems clear that a shortage is coming locally as well as nationally.
THE TEN-YEAR CHALLENGE
As far back as reliable numbers go, home values have increased. Not every year, but the trend is always up, and any effect caused by economic turmoil is only temporary.
To see what I mean, pick any year with
reliable statistics (from about the mid-40’s to today) and compare home prices to ten years before or
after. See if you can find any ten-year period where home prices fell.
You can’t do it.
Take this latest downturn for example–2010 prices are soft and well below the peak of a couple years ago, but still well above the values of 2000.
With most any commodity or investment, soft prices are seen as buying opportunities. Today may be the best opportunity to buy in your lifetime!
What choice will you make?
CONTRARIAN THINKING
Many small investors would have jumped at the chance to invest in housing in 2005. Looking back, that would have been about the worst possible time. Today, if you make the suggestion that it might be a good time to invest, those same would-be investors think you are crazy.
A wise investor once said the best time to buy is when the blood is running in the street. When the stock market was going crazy in the late 1920's, the Kennedy fortune was saved and multiplied when Joseph Kennedy got out of the stock market just before the crash of 1929. These men believed in not going with the crowd. They knew that the multitudes generally jump in after the bull market has already had its best run.
Contrarian investors know that the hottest market is generally the best time to sell. Contrarians buy when the crowd becomes disillusioned and are dumping their holdings. Contrarians know that, historically, every boom is followed by a bust, and every bust is followed by a boom. The business cycle always repeats and the contrarian invests accordingly.
Ask yourself where we are in the cycle today. Then look at history and ask yourself what comes next. Ask yourself if you want to run with the crowd, or if you have a bit of contrarian spirit. Homes are a great buy today, and interest rates are cheap. Take a lesson from history - you’ll know what to do.
