Home Prices Decline For The Third Month In A Row

“The broad-based deceleration in home prices continued in the most recent data,”  says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices

The housing market was greeted with a double-whammy so far this week.  Yesterday’s Pending Home Sales Index for August showed a monthly and year over year decline in the number of home purchase contracts signed last month. Today the Case-Shiller home price index registered its 3rd monthly decline.

Perhaps most notably was the fact that the home price decline for San Francisco was the biggest factor in the decline of the C-S index.  This graph prepared by Zerohedge shows the significance of San Francisco home prices as leading indicator for the coming onset of financial and economic turmoil (click on graph to enlarge):

Perhaps just as telling is the fact that the Dow Jones Home Construction is once again down over 1% today, despite the fact that the Dow and the S&P 500 are green.   Think about the implications reflected by this.  If housing stocks can’t rally with the general stock market – especially when the Fed’s obvious hand of intervention is at work – what will happen to the homebuilder stocks when the intervention fails and the general stock market turns inexorably lower?

I posted a new housing stock short-sell report last night.  Given the enormous amount of debt this company has taken on in relation to the number of homes it’s selling, I believe this company’s financials are going to deteriorate quickly as the housing market crumbles.  The situation is compounded by the company’s use of sleazy accounting, which I detail in the report.   You can access this report here:   Homebuilder Research Reports.

I am projecting a base-case 70% ROR with this trade over the next 18-24 months.