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 firstname.lastname@example.org