PennyMac (PFSI) is a mortgage finance company that describes itself as a specialty financial services firm with a comprehensive mortgage platform and integrated business focused on the production and servicing of U.S. mortgage loans and the management of investments related to the U.S. mortgage market. The stock has been getting crushed and insiders have been dumping shares:
The graph above (click on image to enlarge) shows PFSI vs. the BKX banking index. Other mortgage finance stocks have been getting hammered as well. That steep decline that started on Dec 24 in the graph above was not accompanied by any news triggers. In fact, PFSI signed a new “warehouse finance” credit line with Credit Suisse for $100mm at the end of the year. That should be great news if you are a housing and mortgage finance perma-bull.
When stocks decline steeply with no related news events to set-off the price-drop – and when one of the largest individual holders, Leon Cooperman, is unloading shares – it’s the market’s way of signalling problems not yet recognized by the peanut gallery. PFSI reported its Q3 earnings on November 4 and with a cursory glance they looked to be what the market expected. The stock did not do anything unusual.
The action in PFSI’s stock and in some other related mortgage finance and real estate stocks tells me that the “invisible hand” in the market is signalling a significant downturn coming in both home sales volume and mortgage finance volume. Per the invaluable work of John Williams (Shadowstats.com), when you remove the statistical manipulation and annualization of the existing home sales report for December, it turns out that existing home sales evaluated on an unadjusted monthly basis for the fourth quarter was down 20% from the third quarter. That’s not something that you’ll hear about or read in mainstream media or on venues like Seeking Alpha or Realmoney.com or the Motley Fool or Business Insider.
That is what I believe the market is seeing and is why stocks like PFSI are taking a beating outright and relative to the overall banking sector. Anecdotally, I just got a call from a friend who told me house that would have sold for $620k on his block last year was put on the market two weeks ago for $599. The neighbors all thought the price was too low. Two weeks later, today, the price was lowered to $579. I bet that price will be lowered at least once or twice more before it sells. And this is an area that was still seeing bidding wars last summer.
Sometime in the next few weeks I’ll be featuring another mortgage-related stock in my Short Seller’s Journal that still has a LONG way to fall before it gets back to its 2008 great financial crisis, pre-QE price. My picks this week are significantly outperforming the market. SHORT SELLER’S JOURNAL
Just Google GLVRA to see what is happening to housing in
Las Vegas. Supply is building quickly (no pun intended) and
sales are in the toilet. Housing in going to be one of, if not
the lead horses that take this economy down. A friend of
mine who lives in L.A. and lives in Vegas 3-4 days per week
for business, just rented a furnished luxury two bedroom
condo with all utilities including cable and internet for $1250
per month. He also said that there were many choices available
in the Las Vegas area. We are just at the beginning of the end.
Excellent info. I welcome ALL “on-the-ground” intel from readers about what they are seeing in their market.
I live close to the largest shopping mall in the Southeast. Five miles away from the mall developers got a strategic piece of land [ I remember as a horse farm] and are building a new community of tightly packed homes on postage-stamp-size lots. Surrounded on three sides by very busy roads, it will be raked by headlights and the sounds of traffic including emergency vehicles. They are very slow with this project. It will be interesting to see if the initial prices listed “starting at ___” will be the prices they sell for. There is an appeal of a new home under warranty with little need for maintenance. But 1/2 mile away one can buy a well-maintained home with four times the lot size and twice the square feet, plus community pool & tennis, for $100K less. It will be interesting to see how this turns out.
Dave – this on the Chicago market – homeownership rate…
The FED’s already started a stealth NIRP marketing program;
Waiting for the bubble to pop in Vancouver, look at the chart in this story.
Great screen name!
With the economy going into the toilet in Alberta, Canada might be the next one to throw their hat into the NIRP ring.
You don’t wanna be a Real Estate developer in Alberta right now with a bunch of unsold inventory;
Jan 7/16 — Calgary rent prices drop by almost 20%, says website owner…
Jan 14/16 — Calgary real estate market could see more ‘significant price drops’ than CREB forecasts
Jan 27/16 — Calgary real estate market now has ‘strong’ evidence of problems: CMHC…
Jan 30/16 — CMHC issues caution about oversupply…
Dave, also worth mentioning the BKX is itself severely underperforming the broad market so this stock is getting totally trashed.
Media now publicly starting to speak about credit risks at Deutsche Bank. Stock is again under pressure today. More and more of the conspiracy theory seems to become true.
I live in Wesley Chapel FL. and they are building malls and buying houses like everything is booming. Of course we all know this isn’t going to end well so it will be interesting to see what happens when it comes crumbling down