The Federal Reserve is set to cut interest rates for the first time in four years.
And there’s one sector that is about to soar even higher … homebuilders.
Even when interest rates were rising, homebuilders have been crushing expectations.
When the Fed began raising rates in March 2022, homebuilders were off to the races…
They have way outperformed the S&P 500 index.
The reason for the rise in homebuilders is simple: limited supply and increasing demand.
Severe Supply Shortage: The $16 Trillion Opportunity by 2030
Right now, there is a great imbalance between what people want and the supply available.
The existing supply of homes has plummeted by 75%:
Yet, demand is through the roof because of the Echo Boom.
The Echo Boom is a powerful and unstoppable mega trend … one that is creating massive demand for new homes.
Yet even with million-dollar price tags, they’re getting scooped up in the blink of an eye.
That’s because right now, there is a demographic full of people who are buying them in droves.
They’re called Echo Boomers.
The term refers to the children of baby boomers who were born specifically in the late 70s to mid-90s.
That includes a chunk of Generation X — over 65 million Americans there.
And almost all of the millennials — the biggest generation in U.S. history — over 72 million people.
There’s a famous saying that goes, “Demographics is destiny.”
It means each and every one of us is different — but the phases of our lives follow a predictable pattern.
Well, in 1996, it was Generation X essentially creating the mother of all housing trades — NVR Inc.
In 1980, NVR was a startup Virginia homebuilder.
In 1993, they went public.
And by 1995, NVR was worth $84 million.
Then comes Echo Boom #1 in 1996…
NVR’s business model was about to give them what Yale University describes as a “quasi-monopoly” wherever they set up shop.
In a year, the builder was worth nearly $250 million.
Then soared by more than 10X to $2.7 billion before the Great Financial Crisis of 2008.
And continued moving higher to $4.2 billion when it ended.
During the 2020 Covid pandemic, the company was worth $20.4 billion.
Fast forward to 2024…
I see the pattern playing out all over again. However, this time, it’s not generation X but millennials.
That’s why I’m calling this: Echo Boom #2.
Millennials are also about to become the richest generation.
Their total wealth is set to grow five-fold by 2030.
They are already making more money from their jobs — and they’re going to get an extra bonus of an inheritance from their boomer parents.
The average projected inheritance is estimated to be $738,724.
All that money will fuel our housing market in 2024 and beyond…
You can stand on the sidelines and watch it unfold.
Or you can buy into the best homebuilder stocks today.
Regards,
Charles Mizrahi
Founder, Alpha Investor