Tag Archives: National Association of Realtors

November Existing Home Sales Plunge

Something we’ve seen in just the last month should make you worried about the housing market.Redfin CEO on Bloomberg, August 5, 2015

November existing home sales, according to the National Association of Realtors, plunged 10.5% from October to November.  Note that this metric, as calculated, is the NAR’s “seasonally adjusted, annualized rate (SAAR)” metric.  The point here is that the plunge in sales can’t be blamed on seasonality or the weather.

I have been showing in detail in previous posts on this blog that the NAR’s SAAR metric is more than likely overstating the actual number of sales.  Please see previous posts for details.   You can examine this month’s report here:  Nov existing home sales.

Incidentally, one of the trading ideas in my Short Seller’s Journal weekly report this week details a homebuilder short sell idea and it includes a copy of one of my recent homebuilder reports.  Subscribers received this on Sunday evening.  You can subscribe to my weekly report here:  SHORT SELLER’S JOURNAL.  The other weekly idea suggests a way to short the bond market, especially the demise of the corporate bond market.

A look beneath the headline report reveals that November’s existing home sales report is worse than reflected in the headlines.   The NAR chief economist, Larry Yun, is claiming that the “Know Before You Owe” (KYBO) initiative implemented by Consumer Financial Protection Bureau on October 3 is one of the primary causes for the drop in November sales. However, as is typical of Yun’s apologies for disappointing sales reports, his explanation is unequivocally wrong, if not an intentional lie.

The KBYO rules do nothing more than make it easier to understand the costs involved with financing a home with a mortgage.  Buyers get a disclosure statement three days before closing and, theoretically, can walk away if they can prove they were misled.  In fact, this law will do little if anything to discourage most, if not all, buyers.  Most of them are basing their decision to buy on the availability of 0-3% down payments and record low mortgage rates.

However, November existing sales are based on closings.  it typically takes 30-45 days to close a signed contract.   This means that homes closed in November were based on contracts signed in mid-September to mid-October.  “Enterprising” real estate brokers would use the “threat” of the KBYO event as a selling tool to herd buyers into signing by October 2.  If anything, November sales (closings) should have been boosted by this.

In addition, the reported result for November missed the  Wall Street “brain trust” consensus estimate by 10.5%.  If the KBYO event was at all going to affect November home sales, doesn’t it seem highly likely that Wall Street professionals would have factored this into their estimates?  Wall Street analysts like to appear intelligent and they also like to set the bar slightly low.  A 10.5% forecasting miss is a disaster.   But it also reflects the fact that market’s expectations for the housing market are exceedingly wrong.

This housing market is set up to crash.  We are seeing the same things going on in the mortgage market as we saw in the housing bubble years.  –  South Florida mortgage processor

Furthermore, everyone was aware that the Fed might raise interest rates in December. This is another event that our “enterprising” house salesmen would have been pushing hard in order to “incentivize” prospective buyers into signing contracts “before rates go up.”  I’m still hearing mortgage ads continuously on the radio from mortgage brokers making this pitch. This too should have boosted the number of homes that closed in November, ahead of “rates going up.”  It seems that a pre-interest hike rush to close a mortgage did not occur.

Finally, Larry Yun has been making the case since early this year that “low inventory” is affecting the rate of home sales.  Once again this pathetic apology ignores the long history of data which shows the contrary.   The historical data shows that there is an inverse correlation between the level of inventory and the rate of home sales. In other word, lower inventory stimulates a high rate of salesUntitled and vice versa.  I detailed this fact in this Seeking Alpha article:  LINK.   Here’s the Cliff’s Notes graph (click to enlarge):

I’d love to hear Larry’s response to this indisputable data from the St. Louis Fed’s website.  Having said that, the inventory level in November jumped up to 6.3% to its second highest level of the year.  Larry will have to fumble around for another excuse next month.

I have been writing about the fact that I’ve been seeing a literal flood of listings hit the market since the late summer all over metro Denver.   In fact, the high end of the market – i.e. over $800k – was being flooded with listings since the spring.   In some high end areas the number of “for sale” signs is jaw-dropping.  The “new price” signs on top of “for sale” signs are raining down hard now as well.   Moreover, the amount of listings in the $300k-$750k is has been rising rapidly since October.

I mention this because Denver was one of the first big cities to see the bubble pop the first time around.  In housing, market trends typically hit Denver before the rest of the country. This occurrence goes back to at least the late 1970’s when Denver housing was hit by the oil bust back then.

What I’ve been seeing since the late spring this year is nearly identical to what I was seeing all over Denver in 2006/2007.  In fact, the number of “for rent” signs in front of homes is significantly higher now than back then.  This tells me that there’s a lot of “investors” and “flippers” who are stuck – they can’t unload the home they bought in the spring unless they are willing to take a hit so they try to rent it out to cover their monthly expenses. Given that a glut has formed in the Denver apartment market, there are going to be a lot of unhappy home traders by early 2016 – just like the first time around 9 years ago.

I believe that it is highly likely that 2016 will be a very difficult year for the housing market. Having said that, I am expecting the new home sales report for November to beat market expectations.  I say this because the two series – new and existing home sales – seem to be on a schedule in which one misses big and the other beats big.  They reverse roles the next month.  This “strange” occurrence has been going on since the spring.    But this won’t change the underlying reality, which is that the same middle class income dynamic that is driving retail sales into the ground will soon be driving home sales into the ground.

Statistical Witches Brew Belies The Truth About The Housing Market

The fundamentals of housing are so weak that when the tide does start to go out because of different possible catalysts, it’s going to reveal a mess.  – comment to me from a reader who is watching the disintegration of the housing market “recovery” in California

Despite all of the bullhorn, rah rah rhetoric coming from the National Association of Realtor’s chief cheerleader, Lawrence Yun, the massive intervention in the housing market by the Fed and the Government is beginning to fade quickly.   I guess in the face of evidence far too overwhelming and obvious to cover up with propaganda-laced sound-bytes about “strong jobs growth” and “low inventory,”  the NAR has been forced to admit that the energy market depression – LINK.  At some point, when the “tide does start go out,” everyone is going to wonder why the NAR’s seasonally adjusted hocus pocus data has not transmitted into actual, bona fide sales.

I wrote an article for Seeking Alpha which explains the corrupted foundation underlying the NAR’s statistical witches brew.  In fact, I have evidence direct from the Fed that shows the “low inventory” narrative is 100% false – sales and inventory levels are actually inversely correlated.  Funny thing, that.  But it won’t be funny to the people who chased the price of their dream higher by listening to the “wisdom” of their “friendly” house broker.  You can read my article here:   Existing Home Sales For October Drop More Than Expected.

I toured some middle/upper middle neighborhoods yesterday that up until recently had very little on the market.  Mysteriously, a lot of homes seemed to have popped up on the market for sale in the last few weeks.   I was wondering if perhaps the home broker community had convinced their “pending” sellers to list their homes for Black Friday Month.  You have wonder, what is going on that would cause someone to list their home going into the slowest seasonal period of the year for homes sales?

Existing Home Sales Got Smoked In October

What happened to the big recovery in housing?  It’s sitting on the front lawns of the all the new “for sale,” “price reduced,” “new price,” and “for rent” signs you are seeing everywhere in your city now.   I’m getting emails/comments from readers on this all the time now.  By the way, many of the “for rent” signs you are seeing are stuck flippers.   This is exactly the way the big housing bubble played out as it was popping.

The homebuilders are among the most overvalued sector of the stock market.  Soon their stocks will be doing what we’re seeing in the retail stocks and, today, in some of the healthcare stocks.   Take advantage of this with my 2-report homebuilder research report deal:   Homebuilder Research Report Special.

One of the homebuilders in that report might not make it past 2016 without a debt restructuring. I explain why.  I’ll have a detailed analysis on the existing home sales report later.

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

A Bearish Warning From The Pending Home Sales Report

The warning signals are coming from several sources now.   Many major MSA’s have gone from apartment rental shortages to oversupply with more supply on the way;  Sam Zell recently unloaded a big chunk of apartments from his flagship REIT – a repeat of a  move he made in 2007;  housing prices have been dropping for the better part of the last year in several MSAs – 30% All Homes Lost Value Last Year;  large investment funds are now starting to  unload large portfolios of homes that had been  structured for  high yields from rents but have significantly underperfomed.

The crux of the problem is that the Fed’s massive stimulus of the mortgage market, combined with increased Government subsidization of FNM/FRE/FHA mortgage programs, accomplished no more than temporarily stimulating a small bounce in homebuying.  But a large portion of this homebuying was done by “investors” and flippers.  That ship has sailed as housing prices, contrary to the calculus reported by the Case-Shiller index (which Robert Shiller has admitted in the past is flawed) have been declining in most cities since the spring.  Flippers are now finding themselves stuck on homes that they are unable to flip unless they are willing to eat loss.

I explore the significance of the latest Pending Home Sales Index report, which has now declined in 3 or the last 4 months in this Seeking Alpha article:  Pending Home Sale Indicating The Bear Is Back.    This is true despite the fact that the Government just allocated more taxpayer support by rolling out  a zero-down mortgage program for the low-income demographic.   As I discuss in this article, mortgage subsidies won’t help a population that can’t earn enough income to support the monthly cost  of home ownership.

I have published a new homebuilder report which shows why this particular homebuilder is going to get cut in half in price over the next year.  This company happens to focus on the lower-end homebuying demographic and it recently reported a continued decline in unit sales.   This stock fell 9% after it reported and it has yet to rally back to its pre-earnings level despite the massive move up in the S&P 500.

You can access this report here:  HOMEBUILDER REPORTS

In response to several recent inquiries, I’m offering a package of my older homebuilder reports at a discount.  The numbers in the report are dated but the primary premise explaining why each homebuilder is a great short is still intact.  In fact, two of the companies are now well below their stock price when I published the reports, despite the fact that the S&P 500 is significantly higher than when the reports were published.  There’s a message there…

I am offering the older reports at a discount until I get the numbers up-to-date, which  I will be doing over the next couple of weeks.  Anyone who buys these reports will be entitled to receive future updates per my report buying policy.  If you are interested, contact me at investmentresearchdynamics@gmail.com

 

Bloodbath In Pending Home Sales

The fork-tongued chief sales pimp for the real estate industry, National Association of Reators’ Larry Yun, had this to say:  “Signs of a slowing U.S. economy may be causing some prospective buyers to take a wait–and–see approach.”   Yet, this statement stands in direct contrast to his statement about the bogus existing home sales report from last week:  “The housing market has made great strides this year, backed by an increasing share of pent–up sellers realizing the increased equity they’ve gained from rising home prices and using it towards trading up or moving into a smaller home.”

I wrote a detailed report which showed why the NAR’s existing home sales report was highly inaccurate – Highly Questionable Existing Home Sales Report.   This is the second month in  a row that pending home sales took a dump.  Today’s report supports my analysis that existing home sales likely dropped in September.

What say you, Larry?  Where is all that pent-up demand from people selling their homes and “trading up?”  I will have an in-depth analysis of the pending home sales report later this week.

September Existing Home Sales: Highly Questionable Data

In the context of today’s new home sales report catastrophe – and I’ll have a detailed analysis on that later this week – I continue to question the validity of the National Association of Realtor’s existing home sales report.

Last Thursday, the NAR released its September exiting home sales report, which purported that existing home sales occurred in September at a “seasonally adjusted” annualized rate of 5.55 million.  Notwithstanding the absurdity of taking a data measurement for a single month and expressing it as an annualized rate, the report itself is highly questionable.

Part of my problem with the existing home sales report – aside from the overall methodology of measurement – is that fact that over the last two years there has been a complete disconnect in the correlation between the existing home sales and new home sales reports:

A Pearson correlation coefficient analysis on the 24 months (9/2013 – 9/2015) of data showed just a 47% correlation between new and existing home sales. Interestingly, I ran the correlation coefficient on the data from May 1999 – Sept 2012 and it showed an 87% correlation.

In my opinion, the low correlation between existing and new home sales which has surfaced in the last two years suggests a high degree of estimation error in the sampling and seasonal adjustment methodology used by both the NAR and the Census Bureau. To the extent that errors are introduced into the monthly calculation, this error is compounded by a factor of 12 when the monthly data is converted into an annualized rate metric.

I wrote an article for Seeking Alpha in which I discuss the reasons why the NAR’s report is highly unreliable in terms of measuring the true level of existing homes sales.  You can read my analysis here:  September’s Existing Home Sales Report Is Highly Questionable.

I do know that I’m starting to see home listings pile up all over the Denver metro area. Prices are starting to drop as well as “new price” signs sitting on top of “for sale” signs are popping up everywhere.  I saw a new flavor a couple days ago:  “improved price.”  That cracked me up but it was also in a mid-priced neighborhood in which homes were selling as soon as they were listed a year ago.   It’s starting to remind me of what it started to look like in Denver in 2008.

In fact, I was driving through an area of Denver that I consider to be a “poster-child” example of a collapsing market earlier today.   The Cherry Creek North neighborhood was the epitome of the buy, scrape and build a mcmansion phenomenon that punctuated the housing bubble.  Today I was stunned at the huge number of homes on the market (from Zillow.com, zip code 80206):

Untitled

(click to enlarge)

The average home on the market in this area is over $1 million.  Many homes are listed for several million dollars.  The big question is, why are this many high-price home owners looking to sell their McMansion?    How do you decide to list your home when there’s already 2 or 3 homes listed on your block?

This visual has already appeared in several upscale enclaves.  The “poster-child” house representing where the entire housing market is headed is this home on a golf course in Lone Tree, CO.  Lone Tree is a upper-middle/upper income area that is popular with local businessmen, athletes, oil industry executives and transplanted Californians (I would never live there, although the golf course is nice).   A colleague and I have been watching this house, which was listed for $829k in September and is now offered for $709k:
Zillow.com:  Lone Tree Golf Course House.

If the housing market is supposed to be strong, how come the price of this house has dropped over 14% in just 5 weeks?  The answer is that I believe this how quickly the dead-cat bounce in the housing market is fading.

My latest homebuilder short-sell idea is going to get cut in half, at least, in price over the next 12-18 months:   Homebuilder Loaded With Red Flags.

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]

The U.S. Is A Complete Financial And Political Fraud

Perhaps most emblematic of this complete fraud and corruption that has engulfed our system is the spectacle of Hillary Clinton’s candidacy for President.  She is clearly the front-running candidate for the Democrats and likely would win a head-to-head against any of the Republicans.   How is this sanely possible?

Anyone who bothered to pick up a newspaper just a few times per year since 1991, when Bill was first running for President, knows that Hillary is probably the most corrupt attorney and politician in the history of the country.  Whitewater and her “successful” foray in cattle futures (anyone remember those?) don’t even garner scrutiny anymore because her list of dirty laundry is so long and filthy.   Needless to say, Hillary Clinton should be in front of a firing squad – not in front of Congress justifying her role in Benghazi and the likely next President of the U.S.

Anyone who supports her candidacy is either woefully ignorant, mildly retrarded or insanely naive.

Amazon.com:   I just did quick glance at AMZN’s latest earnings report.  The stock is up 10% to an all-time high on what is exceptionally misleading “headline” earnings numbers.  Yes, it “beat” its EPS and revenue “bogeys” but the entire stock market seems to be giving Amazon a mulligan on the truth.

One again the Company’s business operations failed to generate cash flow.  Directly from its 10-Q’s state of cash flows, the only reason AMZN’s operations produced a positive cash inflow is due to the fact that the Company significantly stretched out its payables – this is despite the fact that its receivables declined – and the Company took in $1.7 billion in Prime and gift card deposits.  We know Bezos ran two separate heavy Prime promotions during Q3, including one that incorporated a big discount to the “membership” fee.  AMZN has admitted that it loses at least $2 billion per year on Prime.

Furthermore, included in AMZN’s numbers is only about half of the amount that it pays out stock-based salary compensation.   I discuss this aspect in-depth in my report.  If AMZN were forced to expense up front for GAAP purposes the entire cost of its stock-based salary payments, it would wipe out completely AMZN’s reported operating income of $409 million and turn the GAAP-based “good” news into a loss.

Amazon’s stock “aura” is the stock market equivalent of Hillary Clinton’s Presidency:   Complete unfettered fraud and deception.  By the way, insiders took advantage of the price of the stock and literally dumped shares during Q3, mostly during August.

The September existing home sales report:   I’ll have more to say on this soon, but the National Association of Realtors statistical Houdini’s managed to convert a steep 6% “unadjusted” drop in monthly home sales from August to September into a “magical” seasonally adjusted 5% annualized rate increase.

On average and in general, this is almost impossible because going back to 2005, existing home sales have declined from August to September every single year except 2013.   The NAR refuses to disclose its seasonal adjustment calculations as I have emailed them several times asking for clarification.   It can therefore only be considered a completely corrupted metric.

The stock market appears to headed for all-time highs again, this is despite that the fact that just about every single non-Government produced macro economic indicator which shows that the economy is already in a recession.   The Government debt limit is about to be raised close to $20 trillion.  Based on Gallup surveys,  the average consumer has a negative outlook for the economy and plans on reducing their monthly household discretionary spending.

McDonald’s stock has bounced 17% since September 1st, despite the fact that its revenues are in terminal decline and the franchisees have expressed a gloomy prediction for the fast food chain’s future:   LINK.    The Company reported a “beat” of the expected earnings but this was achieved through stock buybacks  and a 42-cent charge for tax reserves taken in Q3 2014, both factors of which presented the illusion that MCD had earnings growth this quarter.   But its revenues, like every other big American company, are declining.   Without the GAAP gimmicks, MCD’s EPS would have dropped 15%.  Yet, the stock is at an all-time high.

The U.S. financial system is the biggest, most fraudulent Ponzi scheme in history.  When you peel back the layers of lies, deception and fraud, the U.S. is a crumbling empire.   Go back and rewatch some of the footage of Hillary Clinton’s facial expressions while she’s being “grilled” by Congress.   It’s hard for me to even look at the modern Madusa’s face without turning away – all I can see are venous snakes coming out of her skull in place of what should be hair.  Hillary Clinton is pure evil incarnate.

For me Hillary Clinton represents just how far down the road to doom the United States has traveled.

Pulte Home (PHM) Is Down 9% Today

The National Association of Realtors served up a big bag of statistically manipulated smelly brown stuff today.  My research has shown that there is not a big seasonal difference between August and September in terms of home sales.  The NAR turned a 6.5% not seasonally adjusted plunge from August to September into 4.7% “statistically adjusted, annualized rate” pile of defecation.

But the “tale of the tape” is Pulte’s 6% drop in home closings and the 9% drop in its stock.  In fact, the Dow Jones Home Construction Index is down 2% despite a 300 point ramp in the Dow.  My report details why there’s easily another 10 points of downside unless the Fed runs the stock market to Pluto.

Anyone who bought my latest research report is now 9% richer if they acted on the information I provided yesterday.  Near-money, October puts are up 100%.

I will have a detailed analysis of the NAR’s existing home sales tragicomedy later this week.

[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]