Existing Home Sales Fall Hard

by Dave Kranzler, Investment Research Dynamics Existing home sales dropped 5% in January and – if you put faith in the “seasonally adjusted, annualized rate” that the National Association spits out at us – were well below the Wall Street consensus forecast. The first time buyer as a percentage of overall sales fell once again to just 28% of the sales mix, with investors/flippers once again continuing make speculative purchases. Of course the goons at the NAR are blaming the sales drop on a plethora of excuses. Perhaps the lamest of them all are “restrictive” mortgage conditions. Nothing could be further from the truth as the FHA has reduced its mortgage insurance requirements, Fannie Mae/Freddie Mac now allow 3% down payments, down payments can be gifted, mortgage rates were very close to all-time record lows in Januray, a wider range of buyers now qualify for 0% down payment mortgages and credit scores down to 580 now qualify for mortgage terms that were formerly restricted to 700 or higher. If you look at the not seasonally adjusted number, home sales from December to January fell 32%. This is the largest December to January drop that I can recall in quite some time is more consistent with other key statistics which are showing that U.S./global economy is starting to crash, like the price of oil, commodities and the Baltic Dry Index. I’ll have more detail later, but with the recent run-up in the homebuilder stocks, which was fueled by momentum-chasing hedge funds and a short-squeeze, every single homebuilder in my report section is overly ripe to be shorted: HOMEBUILDER REPORTS.

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