Wednesday, November 27, 2013

The Housing Market Approaches A Cliff

Things always become obvious after the fact 
  - Nassim Taleb

I issued a "sell" on the new homebuilder stocks at the end of January (Dow Jones Home Construction Index basis - DJUSHB).  Since then, the DJUSHB is down 18% and has been down as much as 26%.  This is a remarkable call considering that in the same time period the S&P 500 is up 20%.  During this same period, homebuilder company executives have been dumping their shares at a stunning pace.

I have been postulating that what has been promoted as a housing market recovery by the financial media, Wall Street and the Obama Government is really nothing more than a dead-cat bounce in a long term bear market that has been fueled by a couple trillion in taxpayer-backed Federal Reserve and Government stimulus programs.

Since the beginning of the year, I have written several articles explaining how and why the housing market has appeared to be in recovery when, in fact, both price and transaction volume has been artificially manufactured through the use of direct Fed money printing, Government implemented and tax-payer financed mortgage programs and outright bank accounting and operations fraud.   As for the latter, while some of the banks have been prosecuted and/or engaged in what seems to be large settlements for business and accounting fraud, they have found other ways to exploit the numerous accounting and regulatory loopholes in order to continue their schemes.  As my English major adviser in college used to say, "same old wine, new bottle."

At any rate, I published an article yesterday on Seeking Alpha which shows why the housing market "bounce" is now transforming quickly into a rapid decline.  Keep in mind that when you read news headlines or hear reports on financial tv, they are using year over year comparisons in order to broadcast continued "gains."  As I have writing about, in order to understand what's really going now, you need to look at the month-to-month sequential comparisons.  On this basis, the  housing bounce topped out in late spring and has been declining since June. 

You can read my latest article here:  The Housing Market: A Black Swan on the Horizon

What's most interesting about the sequential decline in almost every housing market metric is that this decline has been occurring in what should be the market's strongest seasonal period.  If you are looking to sell your house and get the kind of prices that realtors are promoting, it is likely too late.  If you want to sell your house, or have to, I would suggest getting it ready to be listed by mid-January and price it to sell, not to maximize profits.

Have a happy, healthy Thanksgiving and remember:  enjoy what you can, as much as you can, while you still can.


  1. Your details analysis is always really good. Looks like several items from different points are going to gravitate to the center (housing, unemployment, weak retail sales and disposable income, China's gold buying and selling oil with their own currency instaed of US domination, etc.). The temp agencies here are hiring only up to Jan 1st then layoffs. Walmart starts its black friday on thanksgiving at 6PM. Remember when you had to be there 2-4am in the morning on friday, just hoping and waiting to get in at 5am? The media last year showed people at Best Buy camping outside the door from midnight onward with sleeping bags and portable TVs just to get in at 5am. They too are open thanksgiving at 6PM. Personally, I'm glad I stocked up on food instead of technology.

    federal unemployment is set to expire 3 days after christmas, layoffs will be coming jan 1st, and obamacare then sets in.College students now have loans that they may never be able to pay off and probably will never own a home. Their future has been mortage off. So much for filling their heads with "Our generation can changed things and changed the world". Maybe on the virtual world of facebook or twitter.

    So we are indeed reaching the cliff!

  2. Off the topic. Do you monitor the price movements on the Shanghai Futures Exchange? There is some sort of backwardation in silver on the SHFE. Just look at the settlement prices of Ag1312 and Ag 1401 since last week.

  3. The war on democracy
    How corporations and spy agencies use "security" to defend profiteering and crush activism

    A stunning new report compiles extensive evidence showing how some of the world's largest corporations have partnered with private intelligence firms and government intelligence agencies to spy on activist and nonprofit groups. Environmental activism is a prominent though not exclusive focus of these activities.

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  4. A stunning new report compiles extensive evidence showing how some of the world's largest corporations have partnered with private intelligence firms and government investasi logam mulia
    intelligence agencies to spy on activist and nonprofit groups. Environmental activism is a prominent though not exclusive focus of these activities. still investment is something you should avoid especially when you follow the crowds :(