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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Mike Johnston who wrote (26040)12/16/2004 3:37:51 PM
From: AC FlyerRead Replies (4) of 306849
 
>>The charts are saying that homebuilders should be bought, not sold......Commodities are screaming again......Treasuries are going through the roof......Something does not smell right......Is it possible that housing will accelerate to the upside ?.....Will we see 50-70% appreciation rates in a final mother of all blowoffs ?<<

Mike, you're asking some interesting questions. As a newcomer to SI, you may not quite yet grasp that the prevailing emotional climate on SI is winter. The pessimists rule and optimistic or even neutral points of view are generally not welcome on many boards. It's sort of the antithesis of 1999, when the pessimists on SI were run out of town on a rail.

There are a million ways to dissect the state of the US economy, but I suggest that one of the key approaches - demographics - is overlooked by the academic and business mainstream. Here's the US population pyramid: census.gov

Now, see that in 2004 the largest age group is 40 to 44 years old. Also see the huge size of the boomer generation (age ~40 to late 50s). And then look at the demographic contraction that follows the boomers - in particular, the relatively small number of people in the 25-34 age group. It takes a lot of pondering to grasp the true, huge significance of all this, but US demographics do quantitatively explain the apparently paradoxical current state of owner-occupied and rental residential real estate in the US. Home prices are booming because of unprecedented housing demand from mid-to-late 40s boomers while apartment rentals are in a depression because of the collapse in the number of people of prime rental age.

Harry Dent - hsdent.com - has done much work to quantify these demographic effects. In particular, he has identified the average peak spending age as about 47+, which means that the current residential real estate boom likely has 5 or more years to run. Shorting the homebuilders right now is probably a not-so-great idea. I don't know why Dent's demographic economic analysis is not mainstream - my best guess is that it just seems too.....simple.
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