Tag Archives: NAHB

The Truth Will Set You Free: Housing Getting Ripped Today

The Dow Jones Home Construction Index is getting ripped lower today, down 5% despite a big move lower in the 10yr Treasury, which tends to drive homebuilding stocks higher regardless of what the stock market is doing.

It’s times like these when the “cover propaganda” is stripped away from the truth underneath.   The termites have eaten away at the foundation of the housing market:

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The price of lumber is your “tell-tale,” as I’ve been asserting for about a year:

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Can you smell the middle class flesh burning yet – especially the ones who bought and overpaid for home in the last 12 months?   Many of them are already underwater vs. their mortgage.

As The U.S. Economic Collapse Proceeds, Gold Continues To Be Heavily Manipulated

The predictability of the Asia rise/European/NY selloff pattern has become almost comic…Gold surged $4 in the last couple of hours of Shanghai trading peaking at $1,163.30 in April about 2-30 AM. Since about 1AM a sliding $US should have been helping but as MKS Sydney reports

“The $1160 level throughout the morning seemed well capped however with what seemed to be some decent iceberg orders lingering on the offer… There was decent selling from retail, macro and even physical names above $1160 so it does still seem pretty heavy going towards the top end of the range and will likely continue this way into the FOMC.”

There are plenty of well-trained (and well-fed) Bears around.

The quote above is from John Brimelow’s “Gold Jottings” daily gold market update (subscription-based).   Almost every night gold rallies during Asian trading hours, only to be pushed back down once the fraudulent paper gold markets in London (LBMA) and NY (Comex) open.  India and China continue to aggressively accumulate physical gold.

Meanwhile, today’s economic reports continue to confirm the fact that the U.S. economy is beginning to contract.  The Empire State Manufacturing  index dropped to 6.9 from last month’s 7.8 reading, missing the consensus estimate of 8.  The new orders component plunged to negative 2.4.  

Industrial production came in at .1%, well below the consensus estimate of .3%.  The January report was revised to negative .3 from the original report of +.2%.   Had the prior report not been revised lower, the report for today would have been significantly negative – as in, reflecting a large monthly contraction in manufacturing output during February.

Finally, the Homebuilder Sentiment index – which I consider to be one of the more absurdly Orwellian metrics – dropped again to 53 from February’s 55.  It missed the Wall Street brain trust estimate of 56.   Here’s Bloomberg’s mascara-covered take, which is in and of itself uncharacteristically and tersely blunt:

The lack of first-time buyers is an increasing negative for the new home market, evident in the housing market index for March where growth slowed 2 points to an 8-month low of 53. The traffic component of the index again shows particular weakness, down 2 points to 37 which is a 9-month low and directly reflects the lack of first-time buyers.

Notwithstanding Bloomberg’s uncharacteristic candor in its interpretation of the falling builder sentiment index, it’s not just the first-time buyer traffic that is falling off.   The median real household income continues to decline, as new jobs are primarily are of the part-time variety and more people leave the workforce than are finding jobs.  This dynamic does not generate the level of income that can support home ownership.  This is why the rate of homeownership continues drop every month.

Let’s not forget that mortgage rates are near all-time lows and the Obama Government has significantly reduced the credit requirements to qualify for the taxpayer-subsidized mortgage programs  (FHA, Fannie Mae, Freddie Mac, VHA, USDA).  Even Government intervention is not stimulating housing sales.

If you want to exploit the fact that the homebuilders are now more overvalued than they were at the peak of the housing bubble in 2005/2006, my Homebuilder Research Reports will show you why and how.

When I say “overvalued,” that means relative to the companies’ underlying financials.  The stock prices are lower now that at the peak, but the various financial metrics like debt, inventory and p/e ratios are higher now that at the peak. Meanwhile, we found out last week that foreclosures, especially repeat foreclosures, are at a 12-month high – LINK

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A Key Reason Why Housing Will Crash

Top 4 largest occupation sectors in the United States all in the low wage service sector paying $10 an hour or less…(MyBudget360.com)

I have been making this argument ad nauseum.  But housing bubble bulls have not just rose-colored glasses on, but they are blind.  From the link above:

People have a hard time wrapping their minds around the economic fact that the top employment sectors in the United States are all made up of occupations in the low wage service sector. We define low wage as a job that pays $10 an hour or less. The press doesn’t really highlight this working poor segment of our society even though a large percentage of our population is employed in an industry that pays very little and offers scant benefits (if any)

This is why the first-time buyer segment of the market has plunged from 40% of unit sales historically to under 30%.   And this under 30% of a MUCH smaller sales pie (click to enlarge):

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Does that look like a “recovering” market?  The homebuilder “sentiment” index was released today and it not only missed expectations but it dropped from 57 in January to 55 this month.  The “prospective buyer traffic” index plunged from 44 to 39 – 39 is a very bearish reading by the way.  Of course,  the National Association of Homebuilders blamed the drop on the weather.  BUT, the region which was most affected by cold weather during the measurement period – the northeast – saw its “prospective buyer” metric rise from 43 to 48.

The housing market is getting ready to fall hard.  Both the poor fundamental economic condition of the most important buyer demographic – the first-time buyer- and the collapse in the oil economy are going blow-torch the housing market.

The company in my most recent homebuilder report –  Chapter 11 Candidate – is going to hit the wall either this year or next.  It is carrying well over $300k in debt per home sold now and it’s cash level is vaporizing.    This is a home-run short-sell/put option play.

Look at this way, despite all-time low mortgage rates and the availability now of 0% down payment mortgages in many areas, home sales are declining – and have been in general since July 2013.   Despite the NAR’s misleading data to the contrary, inventory is piling up, especially in the over $750k price segment.

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More “Boots On The Ground” Data – AND A Modest Proposal

Larry Yun is the Chief Slime-ball Economist of the National Association of Realtors.  And the NAR represents whom? Right, real estate brokers. It’s Larry’s job to manufacture the snake oil that realtors use to sell homes. He doesn’t care about the buyer. He cares about generating commissions for the buyer’s broker. Ditto for the seller/seller’s broker. The NAR is funded – and therefore Larry’s compensation is funded – by fees paid by all the members of the NAR. The members are realty companies. Get it? See how this works?

“Oh, well the chief economist of the National Realtors Association said that the housing market is poised to go higher this year and now’s a great time to buy.” LOL – it’s always a great time buy if you’re a house broker.   But Larry has no clue what’s going on with housing at the “ground level.”  He wouldn’t know “boots-on-the-ground” data if it kicked him in the ass.

In fact, my modest proposal is an invitation to Larry for an open debate on the health of the housing market via Skype that can be recorded and distributed on the ‘net.  Maybe I can confront him directly about how they collect their data and what goes into the “seasonal adjustments.”

Interestingly, I received more “boots on the ground” observations from around the country.   Recall that I’ve suggested that the upper end of the housing market is becoming flooded with homes and that the effect would be a top-down compression of prices and volume.   A reader posted this comment last night:

Another geographical example of what you are explaining [regarding the upper end of the market].  In the Northern suburbs of Chicago, a realtor friend of my wife has been selling homes in the area for a long time. She told us this past weekend that something is going on. She sells $1mm+ homes and said that her listings since July 2014 have not even been getting foot traffic. The perspective buyers that do come for showings want to know if the sellers will come down as much as 20-30%! I guess we are beginning to see that even the so called “wealthy” are holding their money a lot tighter now.

Heh heh heh…what’s funny about that is that by the time the sellers drop their price 20-30%, the prospective buyers will have disappeared because they’ll sense that all the sellers are dropping their trousers.  The real estate market in the modern fiat currency, debt-fueled system tends to operated on momentum.   The price/volume forces are driven to extremes in either direction.  We are about to see the completely artificial intervention momentum of the last three years rip in reverse.   You heard it here first.

A colleague of mine who has a second home in Scottsdale, AZ sent me an e-mailing he got from a very high end real estate/golf club development down there.    The home sales whore broker is Berkshire Hathaway Home Services – you get the idea.  The e-mailing had three homes, all between $1.1 and $4 million.  ALL OF THEM had been dropped in price 10-15%.  My colleagues comment was “price reductions right at the beginning of busy season – hmmm.”

You see, this is the kind of data that Larry Yun and all the Wall Street housing market pimps don’t look at and evaluate.  They purposely ignore it.  It’s easier to manufacture snake-oil to sell when you don’t know the truth.

One last comment.  A reader sent me this email this morning:

I purchased your report on XXX back in October and have short positions with put options as you suggested. So far I’m a quite a bit up and wanted to ask you about something you’ve mentioned in a few of the blog posts over the past several months. For example, you mentioned in the 11/21/14 post to take some profits when the markets nosedive. I’m thinking that the recent performance of XXX qualifies as such. Do you have any thoughts on a possible bounce back up for XXX in the coming months?

My response was to immediately book his profits on the options and purchase one of my two most recent homebuilder reports and roll some of his profits into shorting one of those companies’ stocks (or both, for that matter).   Both of those stocks have a lot further to fall than XXX and they are more directly by both the upper end collapsing and the carnage in the oil market.

Home Builder Sentiment Plummets At The Wrong Time

Does anyone really still believe it’s the weather?  For anyone who still has hope for the housing market, don’t forget that “hope” rhymes with “dope.”

The NAHB released its monthly home builder prozac index today, which showed a continued decline right in the middle of what is supposed to be the 2nd/3rd best seasonal month of the year for home sales:

Confidence among U.S. homebuilders dropped in May to the lowest level in a year, showing the residential real estate market may be slow to recover after an unusually harsh winter.

The National Association of Home Builders/Wells Fargo builder sentiment gauge fell to 45 this month, the weakest since May 2013, from a revised 46 in April that was lower than initially reported, figures from the Washington-based group showed today. Readings less than 50 mean fewer respondents report good market conditions. The median forecast in a Bloomberg survey called for 49.

I don’t know about anyone else, but I’m fatigued from hearing the “bad weather” term to describe deteriorating economic fundamentals.  I wonder what the excuse will be in July – it’s too hot?