According to Jim Cramer from Mad Money, the housing market is turning into a secular growth story.
I like a lot of Jim Cramer’s content. However, that does not permit me to go run out and buy every stock he promotes. Do your research! While I’m certainly not a financial advisor, Cramer talks about the real estate market in this particular video.
Headlines Are Baiting You
We’ve gone over how real estate headlines should never be the main focus in previous blog posts and videos. Stay away from the headlines and dig deeper into the bulk of the content, as headlines will try to lure you with negativity. You have to do your research because a lot of the headlines will make you believe the world’s falling apart.
New Sales Versus Existing Sales
If you look back to any of my previous videos regarding new sales versus existing sales, you’ll find that Cramer is right; existing sales are up big time. All the lack of new inventory is pushing those values up as well.
Now, if rates do go up, that will be a bad thing for real estate. Usually, if we see a 1% interest rate hike, that’s about a 10% drop in value based on history. In the past, I’ve actually heard housing as much as 17% of the GDP; Cramer refers to 10%. So I don’t know where the differences are on that, but I believe it’s closer to 17%.
Trade School
I love the direction Cramer is going in this video, nobody talks about benefiting from trade schools. Nobody talks about all the jobs real estate creates. Think about how hard it is right now to get an electrician, a plumber, an HVAC, anybody that services the home to call you back. They are all busy. Real estate is creating a need for jobs in our service providers. You don’t necessarily have to go to college to get a job. You can be paid a lot more money if you go into the trade school.
Today, I encourage any young people that are thinking about their job or getting one, if you’re thinking about going back into high school and college, consider trade school. There’s a massive demand for people that want to get into those fields, and the real estate market, the hot real estate market, is creating a ton of jobs for those people.
The Last Recession and Your Investments
Everybody thinks that the housing market created the last recession. It was a mortgage crisis. The banks caused the last bubble in the previous downturn, the big recession of 2005 to 2007. After that, everything repeated itself with housing because the market was tied to entirely different needs.
Think about it! If you were in the real estate industry in 2010, you would know that people were deathly afraid of buildings. So these last ten years, we have not seen builders and developers take the risk that we need to have the inventory to meet the demand.
Many believe this, but nobody knows what’s going to happen. You’re not going to see real estate prices go anywhere. If it’s going to take years between supply to meet demand, and we’re going to continue to print money, interest rates are going to stay low for long periods.
So, to everybody waiting to invest in real estate sidelines because they believe there’s going to be this vast drop in affordable housing, you will miss your opportunity to invest in real estate. Most of the numbers I’ve seen are from three and a half million to five million to meet current buyer demands.
In the lower end of the market, which is what Cramer refers to as he talks about interest rates going up, you’re going to see less demand. Imagine somebody looking or shopping for a $200,000 home. They’re going to be able to afford less, might get discouraged, and just keep renting.
Buyer Demographic
In regards to Zillow, I’ve mentioned that this great reshuffling, this great demand for buyers and Baby Boomers to be moving to different parts of the country, will create many sell and buy opportunities in many other markets. The biggest buyer demographic, Millennials, where Cramer refers to, are coming into their buying years when half the people still haven’t bought a home. You are not going to see demand for homes go anywhere.
You’re not going to see demand going anywhere, and if we have the shores of supply continue, you’re only going to see prices fold.
Historically, you see interest rates go up 1%, and home values go up 10%. Demand is high, so I don’t know if they fall that much right now in that environment. Cramer goes on to say, “Hey, this is a good thing for our economy,” the whole housing market is doing well, and it’s a good thing, not a bad thing. It’s not a bubble that is waiting to burst.
I continue to say that you will see a strong housing market in 2020, probably just as strong as you saw in 2021. Don’t wait for prices to come falling off a cliff; that is not going to happen this time around.