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 positioning 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