Tag Archives: housing starts

Make America Great Again: Buy Extremely Overvalued Stocks

Key Economic Data Continues To Show A Recession

The stock market assumed a decidedly bearish tone last week, in the face of apparent domestic political instability, increasing geopolitical tensions and, most important, a continued flow of hard economic data reflecting an economy that is in recession (click image to enlarge).

The SPX declined 3 out of the 4 trading days this last week to close down 1.1% from the previous Friday’s close. It’s down nearly 3% from the all-time high it hit on March 1st. Thursday’s big red bar took the SPX below the 50 dma. On all four days the SPX closed well below its intra-day high. This indicates to me that, at least for now, stock market traders are better sellers. Also of interest, for the first time in seventeen years, the stock market declined the day before the Good Friday market holiday.

The growth in loan origination to the key areas of the economy – real estate, general commercial business and the consumer – is plunging. This is due to lack of demand for new loans, not banks tightening credit. If anything, credit is getting “looser,” especially for mortgages. Since the Fed’s quantitative easing and near-zero interest rate policy took hold of yields, bank interest income – the spread on loans earned by banks (net interest margin) – has been historically low. Loan origination fees have been one of the primary drivers of bank cash flow and income generation. Those four graphs above show that the loan origination “punch bowl” is becoming empty.

HOWEVER, the Fed’s tiny interest rate hikes are not the culprit. Loan origination growth is dropping like rock off a cliff because consumers largely are “tapped out” of their capacity to assume more debt and, with corporate debt at all-time highs, business demand for loans is falling off quickly. The latter issue is being driven by a lack of new business expansion opportunities caused by a fall-off in consumer spending. If loan origination continues to fall off like this, and it likely will, bank earnings will plunge.

But it gets worse. As the economy falls further into a recession, banks will get hit with a double-whammy. Their interest and lending fee income will decline and, as businesses and consumers increasingly default on their loans, they will be forced to write-down the loans they hold on their balance sheet. 2008 all over again.  (The commentary above is an excerpt from the latest Short Seller’s Journal).

Despite the propaganda coming from the media, the housing market is in trouble.  37% of all transactions in 2016 were flips.  A flip double-counts a sale because the house trades twice before it ends up with the end-user.  I would bet that in the $300-$600k price-bucket that close to 50% of all transactions YTD in 2017 have been flips.  This is how the mid-2000’s housing bubble ended.

Today the housing starts report for March registered the biggest drop in four months.  Single family starts plunged 32% in the midwest and 16% in the west.   Both multi-family and single-family starts dropped.  Multi-family is going to be a big problem.  Prices in NYC and Miami are dropping like a rock and vacancies are soaring because of oversupply – just like in 2007.  Apartment rental rates are falling quickly and vacancy rates soaring across all the major MSA’s.   Manufacturing  output plunged in March, likely reflecting bulging car inventories at auto dealers, which are at  a post-2009 high.   OEM auto manufacturers are closing plants and laying off workers.  The latter, no doubt, will miraculously fail to register in the Governments next employment report.

Meanwhile, the stock market continues disconnect from underlying economic reality. Auto, retail and restaurant sales are plunging. The explanation for falling retail sales is simple: real average weekly earnings have dropped two months in a row. The consumer, as I’ve been suggesting, is tapped out on two fronts: disposable income and the capacity to take on more debt.

Despite the obvious intervention in the stock market by the Fed and the Government, via the Treasury’s Exchange Stabilization Fund, plenty of stocks are tanking. As an example, I recommended shorting Kate Spade (KATE) to my Short Seller Journal subscribers about a month ago at $23.50. The stock is trading at $18 this morning – 23% gain if you shorted the stock and even more if you used puts. You can get in-depth economic and market analysis plus ideas for taking advantage of the most overvalued stock market in U.S. history via IRD’s Short Seller’s Journal. For more information, click here:  Short Seller’s Journal Subscription Information.

Housing Starts Crash – Sales Volume And Prices To Follow

In many areas of the country prices are already down 5-10%.   I know, you’re going to say that offer prices are not reflecting that.  But talk to the developers of NYC and SF condos who are trying to unload growing inventory. Douglas Elliman did a study of NYC resales released in October and found that resale volume was down 20% in the third quarter vs. Q3 2015.  A report out in November published by Housing Wire said that home sales volume in the SF Bay area fell 10.3% in the first 9 months of 2016 vs. 2015. Price follows volume and inventory is piling up.

NYC led the popping of the big housing bubble.  It will this time too.  Prices in the “famed” Hampton resort area down 20% on average and some case down as much as 50% from unrealistic offering prices.  Delinquencies and defaults are rising as well.  While the mainstream media reported that foreclosures hit a post-crisis low in October, not reported by the mainstream media is that delinquencies, defaults and foreclosure starts are spiking up. Foreclosure starts in Colorado were up 65% from September to October.

Housing starts for November were reported today to have crashed 18.7% from October led by a 44% collapse in multi-family starts.  No surprise there.  Denver, one of the hottest marekts in the country over the last few years with 11k people per month moving here, is experiencing a massive pile-up in new building apartment inventory.   I got a flyer in the mail last week advertising a new luxury building offering 2 months free rent and free parking plus some other incentives.   Readers and subscribers from all over the country are reporting similar conditions in their market.  Yes, I know some small pockets around the country may still be “hot,” but if you live in one of those areas email me with what you are seeing by June.

Here’s a preview of some of the content in Sunday’s Short Seller’s Journal (click to enlarge):

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The graph above is from the NAHB’s website that shows its homebuilder “sentimement” index plotted against single-family housing starts. You’ll note the tight correlation except in times of irrational exuberance exhibited by builders. You’ll note that starts crash when exuberance is at a peak. Exuberance by builders hit a high in November not seen since 2005…here’s how it translated in the homebuilder stocks:

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Note the crash in housing stocks a few months after homebuilder “sentiment” index peaked.  From a fundamental standpoint, the homebuilders are more overvalued now than they were in 2005 in terms of enterprise value to unit sales.  This because debt and inventory levels at just about every major homebuilder is as high or higher now than it was in 2005 BUT unit sales volume is roughly 50% of the volume at the 2005 peak.  The equities are set up of another spectacular sell-off.

Refi and purchase mortgage applications are getting crushed with mortgage rates up only 1% from the all-time lows.  What will happen when mortgage rates “normalize” – i.e. blow out another 3-5%?

The next issue of the Short Seller’s Journal will include a lot more detail on the housing market and some surprisingly bearish numbers on retail sales this holiday season to date. You can find out more about the SSJ by clicking on this link: Short Seller’s Journal subscription link. 

A Bear Market In Stocks Began In May 2015

Technically, the move in the stock market that began in March 2009, when the stock market bottomed after the 2008 financial market de facto collapse, should not be termed a “bull market” because it required several trillions of Central Bank and Government intervention to move the stock market.   Definitionally the stock market is no longer a “market” – rather it’s an intervention.

Having said that, with the entire financial world – especially Wall Street analysts and financial  media boobs – focused on the S&P 500 and the Dow, the NYSE Composite, which covers every stock traded on the NYSE, has begun what is likely a bear market that started from its record high of 11,254 on May 21, 2015:

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As the graph above illustrates, the NYSE Composite index – every stock that trades on NYSE – is down close to 6% since May 2015.  The NYSE Comp is more representative of the stock and more reflective of the deteriorating conditions in the economy than are the SPX and Dow, which are used as propaganda tools by the financial market and political elitists.

In fact, as has been demonstrated in several places in the alternative media, as it turns out just a handful of the largest cap stocks are keeping the SPX and Dow in what appears to be a “bull market.”    This graph below sourced from Zerohedge shows the performance of the SPX with and without the infamous “FANG” stocks (FB, AMZN, NFLX, GOOG):

As you can see if you strip out the FANG stocks from the calculation of the SPX index, the index is flat going back to the beginning of 2015. Yet, the SPX hit an all-time high in August 2015. Qu’est-ce que c’est?  As explained in the ZH article:   The FANGS “have gained $570 billion of market cap or nearly 80% during the previous 19 months” [Jan 2015 – Aug 2016]…”if you subtract the FANGs from the S&P 500 market cap total, there had been virtually no gain in value at all.”

I wrote to my Short Seller Journal subscribers this past weekend:

NYA began diverging from the SPX and the Dow back then. It points to broad overall weakness in the stock market relative to the biggest stocks by market cap. This pattern in the broader stock market is also more reflective of the economic reality of a deteriorating economy. Small and mid-sized companies are experiencing deteriorating fundamentals which is translating into deteriorating market caps.  SSJ for October 16, 2016

The point here is that economic reality is diverging from the propaganda infused message that the Fed, Wall Street and politicians want us to buy into.  The housing market illustrates this perfectly.  I have been detailing in my blog the methodology by which the Government manipulates the new home sales statistics.  This morning it was reported that housing starts for September plunged 9% from August.  Of course the media puts its propaganda spin on this. For instance, Bloomberg attributes the drop to multifamily starts. But multifamily starts is the metric that gave the housing starts report any “legs” to begin with.  Marketwatch references a “durable recovery.”  But does this look like a durable recovery?

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New single family home sales – despite the trillions of dollars infused into the housing market by the Federal Reserve and Government – never got any higher than where they were in 2008 after the housing bubble popped and sales had already dropped by 66%. Before that, the last time single family home sales were at Marketwatch’s “durable recovery” level was in 1995!

And in truth the methodology used by the Government to present new  home sales (Seasonally adjusted annualized rate based on highly questionable Census Bureau data collecting) grossly overstates the true level of new home sales at any given time.  The same can be said for the NAR’s existing home sales.  Like everything else in our system, the housing market activity is primarily a product of the propaganda and not real economic activity.

The point here is that underlying economy is far weaker than the propaganda coming from the elitists would have us believe.  They can stimulate fraud and deception all they want but ultimately they can not force a shrinking middle class with rapidly shrinking disposable income from spending money.

More important, you can make money from this insight because most stocks in the stock market have been going lower since mid-2015.  This pattern in the broader stock market is also more reflective of the economic reality of a deteriorating economy. Small and mid-sized companies are experiencing deteriorating fundamentals which is translating into deteriorating deteriorating market caps (from the latest Short Sellers Journal)

Every week I provide proprietary insight into the economy and markets in the Short Seller’s Journal.  I also highlight at least two or three short-sell ideas.   Most of these ideas have been working now since early August (late Fed to late July was rough).  As an example, in the September 18th issue I presented Credit Acceptance Corp, a subprime auto loan finance company with a balance sheet that is a ticking time bomb, with the stock at $198.60.   It’s trading today at $183 – down 7.8% in less than 4 weeks – despite a largely flat SPX in that timeframe.  CACC will eventually be cut in half from here, at least.

SSJ is a monthly subscription that is published weekly.  I also provide some ideas for using puts if you are not comfortable shorting stocks and I also disclose when I participate in the ideas in my own account.  You can cancel at any time – there is no minimum commitment. You can access more information on the subscription here:  Short Seller’s Journal.

Here’s another example of the insight and analysis provided in the SSJ:

Another interesting report out last was China’s exports for September, which were down 10% year over year in September vs. -3.3 expected. The US and Europe are China’s largest export markets. If China’s overall exports dropped 10%, it’s mathematically probable that US and EU imports from China were down more than 10% in September. It also implies and reinforces the thesis that US consumer spending is contracting (of course, if this drop in exports from China translates into a narrowed trade deficit for the US, that will be spun as a positive by the financial media!)

Housing Starts Plunge 11% – Signals Renewed Downturn In The Housing Market

The monthly contraction of 11.0% (-11.0%) in October 2015 housing starts was muted by a downside revision to September 2015 activity, yet it came in well below already-negative market expectations…With headline negative detail in October, and downside revisions to August and September detail, the aggregate housing-starts count fell at a revised annualized-quarterly pace of 1.6% (-1.6%)…Based on October’s one-month reporting, the aggregate housing-starts count was on target to contract an annualized quarterly pace of 28.6% (-28.6%) in fourth-quarter 2015.   – John Williams, ShadowStats.com

It’s happening everywhere, not just in Denver.  The “for sale” signs are piling up at the wrong time of year for people to be listing their homes and the “price reduced” signs tell us the sellers are chasing prices lower.   The statistically brewed inventory measurement metric published by the  National Association of Realtors has big lag built into it.  Especially when the current rate of monthly sales is well below the seasonally adjusted, annualized rate cesspool that vomited out by Larry Yun and his confederacy of statistical dunces.

Anyone who bought a home anywhere in the country, except maybe a in a few statistical outlier areas (and those areas will soon catch down to the rest of the market), with a 10% down or less mortgage within the last six months is now underwater, especially when transaction/closing costs are factored in.  Most “first-time” buyers have been using 0-3.5% down mortgages.  They’re now drowned in mortgage debt.

The pundits will blame the housing starts report on a big drop in multi-family unit starts.   The the housing starts numbers originally reported in August and September were revised lower.   It doesn’t matter.  Almost every major city either has a glut of apartment buildings now or will soon.  The truth is, single-family unit housing starts have been flat to down all year.

One of the best “hidden” indicators that the housing market is now contracting is in mortgage activity.  LoanDepot Inc had to pull its IPO late last week – LINK.  LoanDepot is part of the non-bank mortgage lender segment of the mortgage industry, which now accounts for 40% of all mortgage dollars originated.   There’s a lot of reasons this deal was pulled, but perhaps the biggest one was that LoanDepot’s mortgage volume took a big hit in Q3.   When home sales slow down, less mortgages are originated.  Pretty simple math.  It also suggests that professional investors see the same downturn in housing that I see.

Although the dynamics of the current housing market “boom-let” differ from the dynamics of the big housing bubble.   What has occurred since 2010 is a Fed/Government stimulated dead-cat bounce in the context of the secular bear market in housing.  The policy-makers, urged on by the greedy bankers and housing industry chieftains, never allowed the “cleansing” process from the housing bubble to clear itself out.   There’s been plenty of mortgage fraud and subprime activity, but it’s been better disguised over the last couple of years.

The homebuilder stocks are now one of the most overvalued sectors of the stock market. With careful 2ReportSpecialpositioning and trading, there is a lot money to be made on the downside with these stocks.  Despite the recent run-up in the S&P 500, the stock prices of my two most recent homebuilder reports are still below their price when I posted these reports.  One of them experienced declining new home sales unit closings for the past two quarters and one of them, quite frankly, may hit the wall in last quarter of 2016.  My reports show in detail why these two stocks can be profitably shorted – including suggestions/examples on using puts and calls to replicate shorting a stock – and I am offering them together for a special price.  Click on this link or the pic on the right to take advantage of this opportunity:   Homebuilder 2-report Special

The Housing Market Mirage

In the context of the absurdly misinterpreted and highly manipulated housing data released so far this week, the Dow Jones Home Construction Index is down nearly 3% from its high print earlier this week, despite the fact that the S&P 500 and the Dow are up close to 2% this week.  The nation’s third largest new homebuilder, PulteGroup, is down 9% from its high-tick earlier this week, after reporting at 6% year over year decline in unit home closings (deliveries).

While I’ll have a complete dissection of yesterday’s existing home sales statistical abortion released by the National Association of Realtors and gleefully delivered by its cross-eyed, dim-witted chief “economist,” Larry Yun, I wrote an article for Seeking Alpha in which explained why the housing starts report is completely useless as an indicator of activity – healthy or otherwise – in the housing market:    The Housing Starts Metric Is Useless

In fact, despite the ebulliently presented headlines, single-family housing starts showed a definitive, statistically significant decline for September from August.  This is the metric that, if it even had any relevance,  would pertain to the extreme overvaluation of the homebuilder sector.

While it’s extremely difficult to short anything in this market, the homebuilder sector is going to hit a wall of reality that will trigger a big sell-off in the sector.  I believe we are seeing the start of that this week.   My latest report delivered 9% to those who purchased it when I published it earlier this week – more if anyone played the near-money, October puts.   There’s still significant room for this stock to go well below $10 eventually.  You can access my report here:  Homebuilder Research Reports.

[Please note:  Five of my homebuilder stock reports have not been updated with recent earnings for quite some time.   The date listed above each report is the date of the last update.  I am offering these reports at a discount if you purchase multiple reports.  Anyone who buys my reports can receive updates as part of the price of my reports.  Please contact me at this EMAIL address if you are interested in all of my reports.  Once I update them with current financials. they will only be available at full price]

New Homebuilder Report: Large Homebuilder With Declining Unit Sales

Today’s housing starts number for September was highly misleading, as the overall headline result was skewed by a big jump in multi-family units, primarily 2-4 unit buildings.  Single-family home starts declined 5% from August to September.  It’s the single family unit starts that are relevant to publicly traded homebuilders.  Their stocks continue to be more overvalued today than at the peak of the housing bubble.

I have a new homebuilder short-sell report posted.  I want to share an interesting story about this Company, which further adds to the number of “red flags” I have found buried in this Company’s financials.

In late 2013 I wrote an article showing how this Company was managing its earnings per share with share buybacks and inappropriate NOL reversals. Mr. Zeumer sent me an email questioning my math on the effect of the share buybacks and Net Operating Loss reversals. I replied by saying that my math was laid out in detail in the article and that if he was confident that the Company’s math and its use of NOL reversals was appropriate, then he and rest of upper management should take after-tax cash from their bank accounts and buy the stock for their own accounts. I added: “we know that management has been good at selling stock into the Company share buybacks.”  Not surprisingly, I never heard back from him after that.

This particular Company reports its earnings soon. While I have no opinion with regard to whether it will miss consensus or use the accounting gimmicks I present in the report to engineer a “beat,” the Company did miss earnings last quarter. I would suggest the way to play this one is to take a partial short position ahead of earnings with the intent to add if the Company “engineers” a beat and the stock pops, or wait until after earnings to start building a short position. Either way, this stock is eventually going a lot lower:  NEW HOMEBUILDER SHORT-SELL REPORT

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U.S. Financial Markets Have Lost All Credibility

The Fed no longer has credibility, and you can see that. The divergence between the futures markets and the Fed’s own projections about what they’re going to do about interest rates—this is a huge problem,” he told CNBC’s “Squawk Box.”  – Senator Pat Toomey on CNBC

Sorry Pat, the entire U.S. financial system has lost all credibility.  While the economic condition of the United States continues to deteriorate rather quickly, the S&P 500 and Nasdaq continue to push insanely higher on a historically unprecedented tidal wave of printed money.

“Printed money” is electronic money that is created BOTH by the Fed’s electronic printing press AND the electronic printing press that creates debt certificates.  Why the latter? Because debt behaves like money until that debt is repaid.  Simply printing money to repay existing debt while printing enough to issue more debt is not the definition of “repayment.”   This process in fact forces even more “printed” electronic money into the system.

This is why the broad measures of the stock market are moving higher despite deteriorating real economic fundamentals and it’s why housing prices have soared, despite mediocre transaction volume and a recent influx of supply.  All of that printed money is going into paper financial assets.  After all, with the financialization of mortgages, the housing market itself has become “financialized.” Just ask the Fed, it’s injected $1.7 trillion of printed money into the housing market via financialized mortgage paper.

Today’s action on the Comex is emblematic of the complete loss of legitimacy of the U.S. financial markets.   Gold and silver were slammed hard when the housing starts and permits data was released at 8:30 a.m. EST – click to enlarge image:

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Here’s the problem with the highly questionable housing report: The big spike in housing starts occurred in multi-family units. Even if this this number is legitimate, the expansion in apartment buildings is occurring as a massive influx of rental buildings that have been in process over the last year are hitting the market.

In other words, the apartment rental building market is in the midst of a bubble that is bigger than the mid-2000’s bubble.  Not only can I confirm this fact in Denver – almost all new buildings, though not advertised, will give new tenants two free months as a move-in incentive – but I have been getting flooded with emails from readers from other large cities who are confirming the same dynamic in their area.  I will have a lot more on the housing market later.  What I have discovered is stunning.

If anything, the housing market data today should have received a very bearish response from the equity markets and a very bullish response from the gold and silver market.  Instead, the Fed is working overtime to prop up stocks and it dumped close to $350 million of paper gold onto the Comex in the span of one minute.

But not only was the housing market report bearish for the system, we learned right before that report that more layoffs are coming in the oil industry;  we learned right after that report that U of Michigan’s measure of consumer “confidence” dropped and missed Wall Street’s expectations by the most since 2006.

Furthermore, how can the price of silver be declining when the U.S. mint acknowledged last week that these is no supply for it to mint silver eagles?   This after huge spike in silver eagle sales in June.

So you see, Pat, its not just the Federal Reserve that has lost all credibility.  It’s the entire U.S. financial system.   The financial markets have become a complete fairytale.  In fact, the Fed lost all credibility back in 2012 when Ron Paul asked Ben Bernanke if gold was money, to which Bernanke replied, “no” after he uncontrollably flashed a facial expression which “tells” he’s about lie.  When further asked why Central Banks continue to buy and own gold, Bernanke flashed that “I’m about lie” expression again and stuttered, “out of tradition.”  Were we watching the modern version of “Fiddler On The Roof?”

At that split moment in time Bernanke’s hubris prevented him from responding with a credible answer. Anyone with any remaining shred of faith in Bernanke’s/the Fed’s credibility – his ethics, morals and spirituality – had their hopes nuked by hubris. It was perhaps the most fraudulent statement ever issued by a Central Banker.

After all, It sure seems like China, Russia and India are converting a lot of paper U.S. dollars into something that was summarily dismissed by the head of the Fed as being a “tradition.”

“No Virginia, There Will Be No Rate Hikes This Year”

Fed has been signaling it will raise rates for two years now. Same powerplay as #grexit scare. Won’t happen. System is broken till a Reset – next signal will be QE4 rumors  – Willem Middelkoop on Twitter

Yes!  Someone else who gets it.  Every week we getting these dopes from the Fed coming out and saying “hey man, the Fed is behind the curve – time to raise rates.”  But the even bigger dopes are the dopes who believe the hot air.  And now supposedly the Fed is on track to raise rates twice still this year.

The Fed has been on target to raise rates several times a year ever since Bernanke’s infamous “Taper” speech back in May 2013.   Last time I looked, the flag flying above the White House was not a Japanese flag, but the Federal Reserve, Wall Street, financial media stage show sure looks a lot like Kabuki Theatre – quite literally, “the art of singing and dancing.”

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Here’s one of the MAJOR reasons that the Fed won’t touch this rates – not this year and not next year:    Housing Starts Unexpectedly Plunge 11.1%

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May housing starts dropped 11.1% in May from April, with single family unit starts falling 5.4% and multi-family units dropping 18.5% (data from the link at the top). Although the month to month data reporting in the housing starts series has been volatile, there has been a definitive downtrend in starts since the beginning of 2013.

You can read the rest of this article I wrote for Seeking Alpha here:   Housing:  Look Out Below

A housing market that is on the precipice of re-collapse is just one of the reasons that the Fed will not be raising rates this year.   The reason the Fed won’t be raising rates next year is because we may well have experienced a systemic reset by then…

Housing Starts Plunge – Apartment Building Bubble Is Popping

Every new apartment building in Denver is now offering one month free as a move-in incentive; some buildings will give you two months free if you push them. There are at least 12 new big buildings in central Denver in various stages of construction. – Investment Research Dynamics

Housing starts plunged 11% in May LINK.  Ironically, this comes a day after the National Home Building Associating reported huge jump in homebuilder “sentiment.”  Let’s remember, “hope” is not a valid investment strategy.

This housing starts number is about as bearish as it can get for the new construction market.  It is also consistent with my detailed research which shows that homebuilder companies have accumulated an all-time high level of inventory, despite a unit sales run-rate which is about 60% below the previous all-time high in inventory back in 2005:

HousingSentimentAs you can see from this graph to the left which shows homebuilder “sentiment,” industry “hope” has perilously disconnected from the reality of sales. Today’s housing starts report is consistent with the actual transaction data. Since when has a business – other than tele-evangelists – ever been able to convert “hope” into cash flow?

The Orwellian financial media is going to focus on the “housing permits” number.  But, to begin with, the filing of building permit is not a valid economic metric.  It costs next to nothing to file a permit and the act of filing for a permit merely gives a builder the right to build.  Second, and more important, the large jump in permits was for mult-family units:

startsandpermitsDespite signs of a glut forming in apartment buildings in most cities, builders filed “permits” to build even more buildings. I know from my own due diligence that every new building in Denver will offer a new tenant up to two months free as a move-in incentive. I am getting reader reports of similar
apartment gluts in many other cities.

Six years of ZIRP and $3.6 trillion of printed money has stimulated an unprecedented degree and catastrophic amount of capital misallocation.  Massive bubbles have formed in every major asset category:   bonds, stocks, real estate and collectibles.

The bubble that has reformed in the housing market is going to result in a more painful collapse than the original housing bubble.  More on this later, but data available from the National Association of Realtors and RealtyTrac shows that 40% of the sales volume this year has been driven by individual investor/flippers.  We are at the point in the cycle at which many of them will be left “holding the bag.”   To compound the problem, many of these “retail” home traders are now using mortgages to fund their  game of hot potato.

I can’t speak on this for every major city, but I know for a fact that in metro-Denver there has been a recent “flood” in home listings.  Even more indicative, I am now receiving “new price” alerts via REColorado several times a day, mostly in the over $800,000 price range. The glut that has formed in both rental apartments and higher end homes for sale in Denver is nothing short of stunning.

The Fed is out of the type of bullets that can be used to support the massive Housing Bubble 2.0 that it has premeditatively blown.  Interest rates are already at zero, although starting to rise uncontrollably on the longer end.  Mortgage rates have blown out close 100 basis points from the recent bottom.  Easy credit has flooded the mortgage banking system in many different forms.

To be sure, the Fed can print a lot more money – and most likely will.  But at this point in the game it will be the equivalent of pushing on the proverbial string.  Only this time the hole through which the Fed will be trying to push the string will be closed.

Housing Starts? Census Bureau Reporting Reaches New Level Of Absurdity

Census Bureau definition of a housing “start:”   Start of construction occurs when excavation begins for the footings or foundation of a building.  Census Bureau

The Shadow of Truth did an interview with NY Post report John Crudele, who is the journalist who caught the Census Bureau fraudulently reporting employment data:  The Unemployment Rate In And Of Itself Is A Joke.

Crudele and the NY Post currently have six Freedom of Information Act requests with Census  Bureau, to which the CB refuses to respond or hand over documents.  Some of them are more than a  year old.  If the Census Bureau/Government does not have any foul play to hide, then why not respond the to the FOIA requests and dispel all doubt?

With this as the context, I think its safe to say that it is highly likely that the CB data with respect to housing starts is wildly inaccurate, especially in light of the collapsing price of lumber:

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In fact, when you examine the Census Bureau-generated “housing starts” number vs. the market price of lumber, the Census Bureau data has no credibility (source: Zerohedge, edits are mine):

20150519_starts2The fundamental economic data as measured by the market does not support the data being reported by the Census Bureau. If housing starts were flourishing, the demand for lumber from new homebuilders would be pushing the price of lumber higher.

Given that we know the Census Bureau has been fraudulently reporting employment data, it is highly probable that the Census Bureau’s data collection and reporting process with respect to housing starts and new home sales is corrupted.

As you can see from the way in which the Census Bureau defines a “housing start,” all that is required to be counted is basically any homebuilder sticking a shovel in the ground of a piece of property with an authorized building permit.   The CB has stated that if it can’t collect data on new home sales in certain regions, it will “estimate” the number of new home sales based on housing permits filed.  I would suggest the same absurd technique is utiltized with respect to “collecting” data on housing starts.

Regardless of whether the number reported today by the Census Bureau reflects any remote semblance of reality, if homebuilders are indeed building more homes, the result will be little more than the continued pile-up of homebuilder inventory.

In fact, as I’ve shown in my homebuilder research reports, new homebuilders have amassed a record level of inventory.  This inventory is piled on top of a unit sales run-rate that is roughly 1/3 the peak level of sales in 2005.

The question is, in the context of the rate of homeowership in ths country continuing to plunge to multi-decade lows, the continued lack of participation in home sales by the first-time buyer, and a massive pile-up on in high-end inventory, who in the hell is going to buy all of these supposed new homes being built?