Forget Stocks. Don't bet on gold. After four years
of plunging home prices, the most attractive
asset class in America is housing!
If all the noise you're hearing about housing has you totally confused, join the crowd. One day you'll read that owning a home has never been more affordable. The next day you'll see news that housing starts h ave plunged to nearly their lowest level in half a century, as headlines announced in March. After four years of falling prices and surging foreclosures, it's hard to know what to think.
Even Robert Shiller and Karl Case can't agree. The two economists, who together created the widely followed S&P Case - Shiller Home Price indices, are right now offering sharply contrasting views of housing's future. Shiller recently warned that the chances were high for a further double-digit drop in U.S. home prices.
But in an interview with Fortune, Case took a far brighter view: "The lack of new home building is a huge help that a lot of people are ignoring," says Case. "People think I'm crazy to be optimistic, but housing is looking like the little engine that could!"
To see where real estate is truly headed, it's critical to keep your eyes firmly on the fundamentals that, over time, always determine the course of prices and construction. During the last decade's historic run-up in prices, Fortune repeatedly warned that things were moving too fast. In a cover story titled, "Is the Housing Boom Over?", this writer's analysis found that the basic forces that govern the market - the cost of owning vs. renting, and the level of new construction - were in bubble territory. Eventually, reality set in, and prices plummeted. Our current view focuses on those same fundamentals, only now they're pointing in the opposite direction.
So, let's state it simply and forcibly:
HOUSING IS BACK!
Two basic factors are laying the foundation for dramatic recovery in residential real estate. The first is the historic drop in new construction that so amazes Castleman. The second is a steep decline in prices, on the order of 30% nationwide since 2006, and as much as 55% in the hardest-hit markets.
The story of this downturn has been an astonishing flight from the traditional American approach of buying new houses to an embrace of renting. But the new affordability will gradually lure Americans back to buying homes. And the return of the homeowner will start raising prices in many markets this year.
Excerpts taken from article in the Fortune Magazine April 2011
To read the complete article, go to:
http://finance.fortune.cnn.com/2011/03/28/real-estate-its-time-to-buy-again/
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