Just for the record, I would not be surprised is tomorrow’s new home sales report is stronger than expected. The numbers are coming from the Government’s Census Bureau and the new home sales series has been irregularly volatile and unreliable. But based on every homebuilder earnings report released so far, new home sales are dropping quickly. Mortgage purchase applications confirm this, as 93% of all new homes use a mortgage for the purchase. Any bounce in homebuilders on tomorrow’s report should be shorted with both hands.
Sales are going lower from here. We are in a long term secular bear market and the market – aided by several trillion in Fed and Govt stimulus, achieved a small dead cat bounce in the context of the bigger trend going on. Employment as a percent of the working age population is at historical lows and those who are employed are back to the 1994 average earnings levels. There is no organic economic support for the housing market.
This post was published at Investment Research Dynamics on September 23, 2014.
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