Marshall Reddick Real Estate Network

Castleman, founder and CEO of Metrostudy, tracks new home completion and sales in 45,000 subdivisions from Baltimore to Sacramento or about 65% of the nations housing market including some of the hardest hit markets like Florida, California, Arizona and Nevada.   His findings are that there are only 78,000 homes that are currently available or are under construction presently.  That is only one fourth the properties available during the 2006 peak of housing availability and sales.  Under normal circumstances, that’s only two and a half months of inventory. 

Under normal circumstances there is a demand for new housing of 1.2 million new homes just from new families entering the housing market, and another 300,000 homes needed for those that are destroyed by fire or natural causes.  That’s 1.5 million new homes needed each year.  Since 2007 there have only been about 600,000 homes built, so there is a huge shortage of housing. Once the economy returns to normal, there will not be enough housing to supply demand, and prices could rise quite rapidly.

With prices and interest rates both at historic lows (this is the first time we have seen both so low at the same time) and affordability so good (only 9.8% of one’s income going toward a payment, down from 17.2% during the bubble) the market is ripe for rapid sales and appreciation as soon as jobs and consumer confidence increase.

Savvy investors are realizing this now and purchasing properties before interest rates increase and eliminate the excellent cash flows we are experiencing right now.

Source:  Fortune Magazine, “Forget Stocks, Don’t Bet One Gold After Four Years Of Plunging Home Prices, The Most Attractive Asset Class In America Is Housing.  It’s Time to Buy Again” April 11, 2011, Pages 79-89.