If The Fed Really Raises Rates, Housing Will Die

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).

4 thoughts on “If The Fed Really Raises Rates, Housing Will Die

  1. Back in the heady days of massive fraud during the housing bubble, a strawberry picker earning $15,000 was able to get a mortgage for a $720,000 house-

    http://www.sfgate.com/entertainment/article/Minorities-are-the-emerging-face-of-the-subprime-2565428.php

    Currently there are many who want to move but can’t or won’t sell unless they get what they paid for their house (which most likely will happen on February the 32nd), there are many who lost their homes when the bubble burst and won’t be able to buy again for a decade, and the wishful thinking that those working for McDonalds will be able to afford a McMansion is the fever dream of the NAR, the same NAR which gives Wall Street and Banksters a run for their money in the realm of fraud, propaganda and fabricated data.

    Other than that, housing is a great investment!
    /SARC!

    1. The only person that works at McDonalds who can still afford a mortgage is that ass-kissing clown, Ronald. The mayor’s position was made redundant, so after losing my McMansion, I’m now living in an old cargo van and eating out of a dumpster …behind a McDonald’s ‘restaurant’.

      ps. If you know anyone who needs an interim mayor or short-order cook, give me a dingle. Sorry, my cell was disconnected, so come on down by Old Mill Road – it’s down by the river 2 miles past the abandoned quarry. I’ll be the guy with a cheeseburger for a head in the white cargo van.

      1. Don’t give up hope yet Mayor McCheese, I hear Chicago needs a new mayor, your campaign slogan can be “Vote Cheesy not Sleazy” or “Here’s the Beef!” You can’t do any worse of a job than the current crop of moronic mayors nationwide.

        Then again, how about a run for the presidency? You would stand head and shoulders above the current crop of presidential hopeful meatheads.

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