I Love The Smell Of Economic Napalm In The Morning…

It smells like…VICTORY…

First off, mortgage purchase applications tanked 7% from the previous week. Mortgage purchase applications are now down five weeks in a row. Mortgage purchase applications have been declining now for over a year. Flash headline: if people are not applying for mortgages, they are not buying homes. Kind of throws napalm on the “seasonally adjusted, annualized rate“ metrics vomited at us by the National Association of Realtors and the Census Bureau. 

Second, housing starts and permits missed the consensus estimate from Wall Street’sbrain trust economic propaganda department.  Now, housing starts are kind of a b.s. number because all a homebuilder needs to do is file a permit on a piece of land and stick a shovel in the ground and it’s called a “start” by the Census Bureau.   Based on my in-depth analysis of several of the largest homebuilders – see: Housing Reports – more than 50% of all new homebuilder inventory can be considered “spec” inventory.

With new home sales volume declining (the unseasonally adjusted, unannualized, actual deliveries net of cancellations, the latter of which are running in the low-mid 20’s percent now), the housing “starts” number is largely meaningless.   This is especially true when you factor in that the big driver in the last year has been multi-family buildings.  I know that in Denver there’s a literal avalanche of large new apartment buildings that are now in various stages of completion.  I also know that all new buildings are now offering 1-month free move-in incentives, including the one I live in, which is less than an year old.  I have had several readers send me emails saying that they are seeing the same thing in their cities.   This means that as apartment rents dive, home rental rates dives and the value of homes in general dives.  This is a full repeat of the last housing bust cycle that began in 2005.

You can read the rest of this article here:   Economic Napalm