Big Cracks Forming In The Housing Market

How many of you reading this were aware that new home prices are down 12% since October 2014?   Do not believe the propaganda.  The headlines are full of lies.  The numbers themselves are lies.

The 2.2% gain in new home “sales” from the Census Bureau was driven by what is likely a corrupted “sales” report from the northeast region.  I am putting “sales” in quotes because “new home sales” as reported by the Census Bureau are based on contracts signed.  How many of you were aware of that?   On average right now roughly 20% of all contracts signed are cancelled.  So the report has a natural 20% error built into it.

But wait, it gets better.  According to the Census Bureau’s stated methodology, in areas where it can’t get data on contracts from homebuilders, it resorts to “guesstimating” the number of new contracts based on the number of permits filed in that area.  In other words the Census Bureau’s data is outright an insane guess in some areas.

As it turns out, the CB is telling us there was an 87.5% jump in “sales” in the northeast in May vs. April.  Well, guess what?  It also turns out that there was a huge spike in permits filed in the northeast in May.   I wrote about this here:  Housing Starts Plunge, Permits Spike Up

Let’s look at some truth.  First, here’s a graph that might startle you:


The graph above shows the year over year monthly change in private residential construction spending. You can see that the metric is falling off a cliff, just like it did when the Housing Bubble 1.0 popped.  You shouldn’t need any more evidence to tell you that what is being reported by the media, Larry Yun, Wall Street and the Government is a complete fraud.

But it just so happens that I wrote a report for Seeking Alpha in which I take a scalpel to the latest Census Bureau reporting abortion and demonstrate that the Housing Bubble 2.0 is about to pop:   May New Home Sales Were Not As Reported

As you can see from the graph above, the homebuilder sector is down 5.3% since its recent high close on April 1. During the same time period the S&P 500 has been flat. This divergence from the market indicates to me net selling by “smart” money. The pattern in the graph above also correlates with the move in mortgage rates from April to the present. If mortgage rates continue to trend higher, I believe it will exert forceful downward pressure on homebuilder stocks.

11 thoughts on “Big Cracks Forming In The Housing Market

  1. you would think that with all the guesstimates and BS out of the government they could cut staff.

    its like a true /false quiz versus essay. Just tick off the answers and go onto the next item

    1. Great snake oil salesman – affirmative action quotas: every quasi Governmental organization or industry association has to hire a “fair” share of retards.

  2. but still TPTB keep it all going. great artciles Dave.
    just feel like they can roll on forever like this….or it already wud have collapsed
    appreicate you.

  3. In a former post, you featured a photo of the new townhouse development near Logan and Mississippi in Denver (Platt Park.) The development is being managed by Cornerstone Apartments, and there’s a big sign on the side of the building that says NOW LEASING! Since I work not too far from the area, but knowing that they’d be way out of my price range, I looked them up online to see what they’re asking.

    I had to do a double-take when I saw the monthly rental cost was $3,500 per month for one of these row homes! And your front yard is basically the on-ramp to I-25.

    Sickening. Who on earth can afford that? The only people who need that much space are families with a child or two. What kind of family can afford that? I am speechless.

  4. The CNBC answer to this, as is the answer to everything, is:

    “Gold down on…”

    …housing market up? “Gold down on improved housing market.”

    Housing market down? “Gold down on deflationary housing market.”

    Rumours of Greek “deal” for a bail out? “Gold down on hope for Greek deal.”

    Greek default and total meltdown? “Gold down on Greek default and rush into US Dollar as safe haven.”

    No Fed interest rate rise? “Gold down on continued low interest rates.”

    Rumor of a rise in Fed interest rate? “Gold down on Dollar strength.”

    1. Some day that report will say gold limit up. Next day gold limit up again. Gold limit up third day (what is it – $100/day, or is it per trading session?). The cap will work for the comex, but what will be happening over in China? Once the price gets released you can bet that some US notice will come out that seeks to strangle the gold market. It will be all hell braking loose. Satan is clothed with a garment of gold – avoid that nasty lustre!

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  6. “On average right now roughly 20% of all contracts signed are cancelled. So the report has a natural 20% error built into it.”

    Doesn’t this assume the house doesn’t subsequently sell to another purchaser? The vast majority of these homes do indeed sell.

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