This is why the Dow Jones Home Construction Index is down 2.7% right now. Many of the individual homebuilders are down 3-4%. Even if the jobs report were bona fide, all those newly minted bartenders and waitresses will not be buying a home.
Mortgage purchase applications have declined in 7 out of the first nine weeks of 2015. Based on seasonality, they should be increasing every week…Just so you don’t think my view on the housing market is a lone voice out there:
The complacency in evidence today is not dissimilar to that seen during the sub-prime era, when both Mr. Bernanke and Ms. Yellen admitted they did not see the problems coming. The real estate market is now accustomed to an ever increasing level of happy drugs. Now that the Fed has clearly come to the end of providing additional support, withdrawal is going to be quite painful (LINK)
Case-Shiller Index publisher: The housing recovery is faltering. While prices and sales of existing homes are close to normal, construction and new home sales remain weak. – David Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices
I published articles which blow away the Orwellian fog from the National Association or Realtor and Census Bureau headline reports for January’s existing and new home sale reports. You can read them here: Existing Home Sales; New Home Sales
The homebuilder stocks have bloated up to valuation levels well beyond their valuation levels – in relation to their underlying sales and profitability – at the peak of the housing bubble. My reports show how and why you can make a lot of money shorting the homebuilders: Homebuilder Research Reports. At least two of the companies will be hit the wall within the next 18-24 months – but the stocks will fall under $10 well before then.
I have yet to hear one housing market bull explain how the home sales will do anything but decline going forward given that the average American’s ability to purchase and fund and home continues to deteriorate – quickly – based on real median income reports, negative retail sales, negative consumer spending and rapidly growing consumer debt (auto, student loan, revolving).