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Forget stocks. Don't bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing.

One of my best investments was buying USG (gypsum drywall producer) options during the worse moments of the market crash in the beginning of 2009. After having sold them for an excellent profit I kept on following USG and I have been lately adding a few shares. I am considering to add substantially more. So I hope that there is a market panic, maybe Greece and the news coming from Europe help for that.

I constantly read about the status of housing since 2007, when I first bought my first 100 USG shares and rode them all the way down from 40 to 4, by the time I started buying strike 7.5 and strike 10 USG call options for a ridiculously low price, those options multiplied and made me recover and have one of the best profits only comparable with the profits I made with Western Digital and Burlington Northern Santa Fe. Those profits were made because I had the conviction to buy quite high quantities during the worse moments of the crisis, when the stocks were trading at a fraction of the current values (BNI was bought by Buffett).

I followed the idea given by Munger "The wise ones bet heavily when the world offers them that opportunity", and by Buffett who says "When its raining gold, reach for a a Bucket", by which they mean that if you you have the chance and conviction you have to bet high, it is of no use to buy a little quantity that will barely move the needle.

So continuing on the housing subject, it looks like we are approaching the moment when housing affordability, higher and growing rent prices, low housing prices, low new housing inventory and demographic pressure are reaching levels where new construction growth is inevitable. On the fortune magazine I found an article about a person who has a very timely view of the status of new housing inventory, Mike Castleman. It's a must read ( !

Castleman is in a unique position to know. As the founder and CEO of a company called Metrostudy, he's spent more than three decades tracking real-time data on the country's inventory of new homes. Each quarter he dispatches 500 inspectors to literally drive through 45,000 subdivisions from Baltimore to Sacramento. The inspectors examine 5 million finished lots, one at a time, and record whether they contain a house that's under construction, one that's finished and for sale, or a home that's sold. Metrostudy covers 19 states, or around 65% of the U.S. housing market, including all the ones hardest hit by the crash: Florida, California, Arizona, and Nevada. The company's client list includes virtually every major homebuilder and bank -- from Pulte (PHM) and KB Home (KBH) to Bank of America (BAC) and Wells Fargo (WFC). The Texan with the best realtime view of housing in the U.S., tells that the naysayers are about to get a big surprise: rising prices for new homes.

Castleman, 70, has worked all his life tracking housing inventory, and claims that this recovery will look like all the others: It will bring a severe shortage of housing. He invokes the livestock business to explain. "It takes three years between the time a bull mates with a cow and when you get a calf ready for market," he says. "That's how it is in housing too. We'll get a big surge in demand and the drywall companies will take a long time to ramp up, and it will take years to get new lots approved. Buyers will show up looking for a house in a subdivision, and all the houses will be sold. The builders will tell them it will take six months to deliver a house." But those folks, says Castleman, will be set on buying a place. "And they'll want it so bad they'll bid the prices up!" If all the noise you're hearing about housing has you totally confused, join the crowd but one day you'll read that owning a home has never been more affordable. In other words: Beat the crowd.

Conclusion: I am not North American and I do not want to travel to the USA and buy some houses, the comfort of my country and my family attach me to my current place, and I never enjoyed travelling for business. But I would certainly consider it very seriously if I was there. So my idea to profit from the inevitable recovery is to buy an ownership share in a drywall producer company, for example a good company like USG, which is after all what new houses are made from.

Juan Velasco
My Blog with more about USG:
Disclosure: long (
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