The U.S. Housing Market’s Darkening Data [iShares Dow Jones US Real Estate (ETF), PulteGroup, Inc., D.R. Horton, Inc.]

Accompanying these trends is the fact that the US homeownership rate post the peak seen in 2004 has fallen to a near 19-year low. The message is that although total household formation has marched forward, households are increasingly choosing to rent their primary residence as opposed to own residential real estate.  Of course, this is the reason that median rents in the US, seen in the bottom clip of the next chart, have incrementally marched to new all-time highs:

(Source: US Census Bureau)

How Will This Contradiction Resolve?

The key macro conclusion of the current cycle is that we are not witnessing a “normal” residential real estate recovery at all, but rather an investment cycle driven by actions of central bankers (think the Fed), global flows of capital, and a new entrant to the residential real estate market from the institutional investor side.

In Part 2: Get Ready For Falling Home Prices we identify the new primary drivers of home values in this unfamiliar pricing cycle and examine their implications for the broader economy, and household consumers specifically, as we look ahead.

Long story short: price reversion is coming. If you own housing as either a residence or an investment, don’t let yourself be caught as vulnerable as you were in 2008.

This article is brought to you courtesy of Brian Pretti from Peak Prosperity

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