On January 30 RealtyTrac realesed their annual report on U.S.
home foreclosures. One of the highlights of the report is the
number of homes there were "flipped" in 2013 rose to 157k.
This was up 16% from 2012 and accounted for 4.6% of all home sales
This was by far the most home flips since the data has been
gathered (2011) and likely the most homes flipped ever, even more
I draw this conclusion because in a similar report, also from
RealtyTrac, the number of homes bought for all cash in 2013 blew
away all the previous records, accounting for around 30% of all
homes purchased in 2013 and over 40% of all December home
purchases. Prior to the financial crisis this number never
reached above 10% as the traditional homebuyer was the primary
buyer and seller of homes. Today the traditional homebuyer is
nowhere to be found as the all cash home flippers, institutions,
and builders are the ones purchasing the majority of homes.
Is Your Portfolio Really Diversified?
The chart below from RealtyTrac sums up the real housing
situation in America, showing that all cash purchases are at all
time highs as well as institutional ownership.
Rainbows and Unicorns
The mainstream media and self interested housing "experts" of
course focus on just the headline housing price data. They do
as they always do and paint the prettiest of pictures for the
public to buy.
Here is one self interested appraiser's take on one particular
market in California, "single-family home market will likely see
price increases in the 12 percent to 15 percent range in 2014 as
previously foreclosed homeowners look to buy houses again."
There are so many things wrong with that statement I don't know
where to begin, but mainly, who is going to offer mortgages to
previously foreclosed homeowners and in what world are back to back
15% yearly housing gains normal?
Perhaps this appraiser is thinking homebuyers won't need
mortgages, as has been the trend in 2013 as mortgage applications
have fallen back to 1997 levels.
The number of mortgage applications has fallen over 60% from
2012 levels, resulting in a first time homebuyer that is now only
27% of home purchases. Throughout history first time
homebuyers have made up around 40% of the market.
However tricked the media and pundits might be, the stock market
Back in May something happened with the housing industry stocks;
they were topping, and we took notice.
In an article written on 5/15 entitled, "Timber", I spoke of the
significantly declining lumber prices and how they were a big
warning sign for homebuilder stocks. The S&P Homebuilders
Index ETF (NYSEARCA:XHB) topped that same week above $32 and fell
to below $29 within a month. Since then it has yet to recover
that $32 price as lumber prices also remain below their peak in
prices last March. Lumber's chart looks like it also may
resume its decline in price which will be another bad sign for
Many of the housing stocks still remain well below their May
price highs as DR Horton (
) peaked near $28 (now trading around $24), KB Home (
) peaked at $25 (now trading below $20), and Lennar Corp (
) now trades below $40 (having peaked at $44 back in the spring of
2013). (Watch the follow up video on lumber and housing
Housing has been hit by another problem, though. After
lumber prices tanked in March, in May interest rates started
In numerous May issues of our subscriber provided Technical
Forecast as discussed in my article on
from November, we started shifting to shorter duration
Treasuries. That move saved investors up to 10% in losses as
yields rose (NYSEARCA:TLT), and shorter durations (NYSEARCA:SHY)
lost much less than longer durations.
Housing has been hit by a double whammy over the last year and
as a result has yet to recover its price highs. Is this a
longer term housing top?
What the Charts Say
The chart below is of the iShares Home Construction ETF
(NYSEARCA:ITB) and has been a focus of ours during this housing
top. Shown in the chart over the last month ITB has not been
able to breach $25.
This is a key resistance zone that has provided sellers.
Notice too that ITB topped back in May 2013 along with most
housing related equities. Buyers have once again run into the
$25 resistance which also again is rejecting prices. If
prices are finally able to break above $25, it will be a short term
buy signal, but no doubt there will be sellers waiting up at the
None of this hasn't prevented short term traders from profiting
on the long side. Our
readers were provided analysis on 1/26 explaining why they could
buy ITB at $23.50 for a short term trade up to $25. Five days
later ITB was up 6% to that important $25 level, where they took
Where to Next?
Lumber prices have rebounded somewhat since their springtime
selloff, but thus far have not been able to make new price
highs. Their prices also look to be at risk of another
significant price decline. If that occurs, it will be another
big warning for the housing sector.
In addition, yields are expected to continue higher over the
longer term, which will also no doubt keep pressure on the
traditional home buyer and house prices.
I am watching a few key support levels on ETFs such as ITB, XHB,
and TLT to warn of the next significant decline in housing related
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