The Greatest Investment Opportunity Of Your Lifetime Is Here

It's been some time since I've written an article for my blog. I felt like there was a bit of redundancy after 60+ articles, and I wanted some new factual data to inspire me. We are now in our 4th year of the real estate market correction, and I have found factual evidence that supports my assertion that this is the greatest investment opportunity of a lifetime but not in the way you might think, based on the majority of my posts. Although buying real estate is still my primary investment focus, I'm going to highlight the reasons why you should now be buying homebuilder stocks.

Before I get to the facts, I'm sure you are hearing or reading, on a daily basis, that the recovery in the real estate market is going to take years to get back to some sort of normalcy. High inventory, due to foreclosures and short sales, has been the leading reason that's given for the negative outlook. On the surface, that would seem to be a prudent position to take. The law of supply and demand would seem to support this hypothesis, but you have to look below the surface to see what will drive the next appreciation cycle. It is in looking below the surface, that I have uncovered facts that are history making and will impact the real estate world in the very near future in a positive way, at least from an investor's perspective.

Homebuilders contributed to the high inventory of homes by overbuilding during the housing boom. In 2005, there were 2,068,000 housing starts. In contrast, if you average housing starts between the years of 1980 through 2010, you get about 1,454,800 starts per year. It's clear to see, that there was definitely a huge increase in the number of housing starts during the boom, that contributed to the excess inventory. But lets dig a little deeper into the stats. Between 1980 and 2005, the lowest number of housing starts occurred in 1982 (1,062,000) and 1991 (1,014,000). These two periods in time had a lot in common with the depressed market conditions we're facing now. In 2009, there were 554,000 housing starts and in 2010, we are on pace for approximately 540,000 housing starts, which marks the LOWEST housing starts in 30 years. Now what makes this even more potent, is that the population today is about 25% greater than it was during the depressed housing market in 1991. Can you say "supply and demand"? To recap, in 2010, we have about 1/2 the homes being built than we had in the early 1990's but an increase in population by 25%. At this rate, once the inventory of foreclosures are eliminated from the banks books, we may actually have a SHORTAGE of homes if this depressed level of building continues. Inventory will not be able to meet the populations demand for housing which will lead to rapid price increases and massive profits for the public homebuilders that stand to take their market share.

Many of the private homebuilders have gone into bankruptcy. The land they once owned has gone into foreclosure and is being purchased for pennies on the dollar by the bigger publicly traded homebuilders like Pulte, KB, Lennar, D.R. Horton, and MDC Holdings (Richmond American). What this means for the investor willing to buy these homebuilders' stocks now is great appreciation in future stock value. Almost all of the fore mentioned homebuilders I've listed here, are trading at a fraction of their 2004 & 2005 values. I believe the potential for 300% to 500% returns on your investment in homebuilder stocks is not only possible but probable due to the current population growth and record low housing starts. You want to invest in sectors that are the most depressed, if you want to invest in sectors that have the greatest upside potential. Remember, the key to investing is to buy low and sell high. I believe there is light at the end of the tunnel for homebuilders within the next 1 to 2 years, so I'm making my investment buys now.