Retail Sales Are Crashing – Housing Sales Are Next

Investment Research Dynamics

Flippers are getting stuck with houses they can’t flip for a profit. Hedge funds have stopped buying and have begun selling. Anyone dumb enough to have been lured into this market in the last few years will be underwater in no time. The foreclosure train will be leaving the station shortly. We’ve been here before. It was ten years ago. Some people never learn.  – The Burning Platform

Last week in the stock market featured several “cliff-dive” drops in retail stocks:  Macy’s, Nordstroms, Advance Auto Parts.  The middle class (yes, “middle class” includes the wannabees living beyond their means in million-dollar “mcmansions”) is tapped out of disposable income and has run up against is ability to take on more debt.   The Nordstrom’s report is what has really freaked out economic analysts:  LINK.

The housing market will show the affects of a rapidly deteriorating economy next.   I noticed something had changed in the housing market in mid-summer based on all of the available data I analyze.  Interestingly, the CEO of Redfin agrees with me:  Something We’ve Seen In The Last Month Should Make You Worried About The Housing Market.

I noticed that the number of listings all around Denver began to increase rapidly.  The NAR’s manipulated “months supply” metric is lagged by a few months and does not pick up big increases in listings right away.  I  noticed this especially in the higher-end areas all around Denver.  My observations have been confirmed in San Francisco:   LINK and in New York:   LINK and NYC/Washington DC:  LINK.

The small bump up in home sales that resulted from Fannie Mae and Freddie Mac lowering their down payment requirement from 5% to 3%  has now run its course.  It’s pulled sales forward and coerced a lot of people to overpay for a home – most of them are households that, over the long term, can not afford the monthly cost of homeownership.   Anyone who bought a home within the last 6 months in almost every major city and used a 10% or less down payment is now underwater vs. their mortgage.  Many are now starting to realize this which is part of the reason retail sales are tanking.

The homebuilder stocks are now more overvalued than they were at the peak of the housing bubble – using ANY financial metric.   What’s different is that the Fed is now out artificial fuel to power the next phony housing “recovery.”  The homebuilder stock are set up for a spectacular drop.

My two most recent reports are being offered for a short period of time in a two-report special price.  Each report is $30 or you can buy both reports for $45:    Two Homebuilder Stock Report Special

Note:  If you have purchased either the Low End Homebuilder report or the Red Flag Alert report, please contact me if you are interested in adding the other report for $15.

One more point of note:  DO NOT overlook or underestimate the fact that big homebuilders like Lennar are now offering ZERO-DOWN mortgage financing in many of their new home communities.  Lennar is not the only homebuilder offering mortgage incentives to move homes.  Many homebuilders are now showing a big increase in “mortgages held for sale.”  These are mortgages that can not be off-loaded on to the taxpayer because they are subprime quality.   The homebuilders are stuffed to the gills with inventory right now.