The Next Housing Crash Is “Coming Soon”
by Dave Kranzler, Investment Research Dynamics
If you’ve bought in the last two years you will be underwater sleeping with the fishes like Luca Brasi (from “The Godfather”) in the not too distant future. – Jim Quinn, The Burning Platform
Anyone seeing a surge in “Coming Soon” signs on top of realtor signs? I drive all around Denver almost everyday surveying the housing market from a “boots on the ground” perspective. I’m seeing both a lot more “coming soon” and “for rent” signs in every neighborhood. For those who don’t know, “coming soon” just means that one broker has an exclusive right to sell a home for short period of time before it’s listed officially in the MLS database. It represents “for sale” inventory that does not get picked up by NAR estimates for about three months (NAR inventory numbers lag).
The housing market has already crashed. The crash occurred in 2005-2006. The visible evidence of the crash emerged in 2007-2009 when foreclosures piled up and prices crashed. The reality is that were are in the middle of housing bear market that was interrupted by several trillion dollars of market intervention – direct and indirect – by both the Federal Reserve and the U.S. Government. Several trillion dollars and this is all we get for a dead cat bounce? (source, Shadowstats.com) – click to enlarge:
I wrote an article for Seeking Alpha explaining why the housing stocks are currently the most overvalued that they’ve been in history, especially in relation to their underlying business and financial fundamentals. “In the context of both new homes sales and homebuilder market sentiment, I believe that homebuilder stock valuations have become exceedingly “stretched” to the upside.”
You can read the rest of my analysis here: April New Home Sales, Homebuilder Sentiment And Overvalued Homebuilder Stocks.
One aspect that no one is discussing is the fact that in the last several months, a preponderance of home sales volume has been driven by “mom and pop” speculators. While historically “retail” flippers have been using cash to buy homes, current data shows that the most of them have resorted to using mortgage debt.
We’ve seen this movie before. This Fed-fueled dead-cat market bounce in housing is just about over and the next leg down will particularly brutal, especially for anyone who has legitimately bought a home to live in over the last couple of years.