Tuesday, July 26, 2011

Housing Just Gets Worse...

Bottom pickers become cotton pickers...the housing market isn't even close to a bottom.  The Case-Shiller index of housing prices across 20 metro areas for May was released this morning and showed a 4.5% decline from May 2010.  Recall that the C-S index is calculated in a way that discounts distressed sales data and thus is skewed to reflect a higher level of indexed prices than would a general random sample of housing transactions.  In other words, the price decline, on average and in general, is even larger than 4.5%.  Here's the report from Bloomberg News:  LINK

To make matters worse, new home sales for the month of June were also reported this morning and showed a 1% decline from May.  This is especially significant because June is in middle of the peak home selling season and interest rates are hovering near historically low levels.  Plus, if you want to believe Obama, Geithner and Bernanke, the economy is improving and this plus low rates should be stimulating home sales.  But here's the Truth: 
Last year was the worst for new-home sales on records dating back a half century. Through the first six months of this year, sales are lagging behind last year's totals.
Here's the news LINK  Although the housing market seems to declining at a slower rate than I have been expecting (I'm always early on my calls), I believe that the true condition of the housing market is even worse than is being projected by the industry/Government constructed numbers and the spin-happy media.  As I have suggested in previous blogs, the true inventory, including pending and stalled foreclosures, potential sellers waiting for the market to "come back," etc create a bigger supply than is being reported.  Furthermore, it's clear - to me at least - that the employment situation and the economy are heading south at a pretty quick pace now, reducing the demand.  If you are considering selling your home in order to save whatever equity may be left, you might want to think about trying to get that done now because I believe that the housing market could be a complete disaster - barring some sort of Red Sea-parting type of miracle - by this time next year.  Obama must believe that as well or he wouldn't be holding firm on extending the debt limit thru the 2012 Presidential election...

One quick technical point about the gold market.  As of this morning there were about 18,900 open calls at 1600 that expire today on Comex gold futures.  Historically, the big bank manipulators write those calls and then drive the market below the price point at which they've written calls in order to keep the premiums.  It's not huge money but it's been easy money for them over the last 10 years.  Today obviously those calls expired in the money by about $17, which means the holders of those calls will likely exercise their option and take delivery of futures contract.  A few months ago this same situation occurred and the manipulators hammered the silver market the day after expiration, likely creating a large number of sellers out of the traders who had taken delivery of their profit-position silver futures.  It was a very transparent manipulative move, but effective nonetheless.  IF we don't see the manipulators successfully "run the stops" tomorrow or Wed, my bet is that we will likely see $1650 gold very quickly, as this will be a very bullish signal that the gold cartel is losing its ability to manipulate the market at will.


  1. I agree, CS seems to not accurately reflect the real state of the housing market. I find Zillow's database to be much more accurate because, as you mentioned, it includes the full force of distressed sales. Zillow's data never showed a surge in value like CS did and it's declined for 59 straight months. Here's a quick summary of the most recent data:


  2. (Dave)

    Agree that Zillow is probably as accurate as any data series out there...thanks for the link

  3. Well Poopers, I gotta live somewhere. They also reported on the news this morning that the price of rentals is also raising. When you are a skinny chick with a bad back, moving sucks. Luv Ya!

  4. (Dave)

    If you have $50k equity in your house, and next year you only have $30k, that's pretty damn expensive rent. If you sell your house now, you can keep the $50k plus probably live in a nice rental for a lower total monthly payment even after taxes than you are paying now for mortgage, insurance, maintenance, etc.

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