The great thing about the residential real estate market is that it floods us with tons of hard data. The bad news is that all of these tea leaves have again started pointing to a turn for the worse.
The monthly index published by the National Association of Home Builders has just been knocked for a big fall, plunging from 22 to 17 in June. The 2005 peak was at 72. The Standard & Poor's/Case Schiller National Price Index dove 3.2% in Q1.
RealtyTrac told me that bank foreclosures hit its second monthly all time high in a row in May at 93,777 homes, and we are nowhere near the peak.
They think that another 5 million delinquent mortgages will pile more homes on to the 3.1 million that banks have already grabbed. Existing home inventories soared by 11.5% in April.
Of course the big home builders, like DH Horton (DHI), Pulte Homes (PHM), and Lennar (LEN), have already figured this out.
Check out the chart below of housing starts for the last 52 years.
The market has seen the greatest stimulus in history, massive tax subsidies for first time buyers, and mortgage interest rates at 4.7%-- 30 year lows. Despite all of this, new housing starts remain trapped at 600,000/year, a quarter of peak levels.
They are bracing themselves for a double dip in the housing market by keeping inventories at bare bones levels and conserving capital so they can live to fight another day.
The only positive is the one advanced by pitiful, almost embarrassingly apologetic, real estate agents that affordability is at a 30 year high.
It all confirms my argument that we are in a multi decade housing depression which has a long time to run.
The big question is: If real estate double dips, will it take the banks with them. Rent, don't own.
By. Mad Hedge Fund Trader
John Thomas, The Mad Hedge Fund Trader is one of today's most successful Hedge Fund Managers and a 40 year veteran of the financial markets.… More