Reason #2 to Short the U.S.: The Housing Market Isn't Recovering

Posted Jan 30th 2010 1:00PM by Michael Shulman
Filed under: Bad News, Housing

Reason #2 to short the U.S. -- The housing market isn't recovering The optimism on Wall Street about housing is surreal given all the public data on housing values, mortgage defaults, foreclosures and new home starts.

Housing prices are going to fall nationally for another couple of years as foreclosures hit 6-7 million in the next 30 months, and the 600,00 to 800,000 homes foreclosed but not yet listed are added to housing inventory. The headwinds created by this will last until foreclosures peak and those homes hit the market in late 2011 to mid-2012. Foreclosures will not hit historical norms until a year or two from that peak.

Add in tightened credit standards, no market for jumbo mortgages anywhere in sight, the end of the homebuyer tax credit and the slowing down of Fed purchases of agency debt in April, and I think you can see why I'm bearish on the sector.

Short the homebuilders with put options on the SPDR S&P Homebuilders (XHB) or individual homebuilders with the weakest balance sheets.

Next: Reason #3 to Short the U.S.: The "New Frugal"

Tags: homebuilder etfs, michael shulman, shorting the u.s., SPDR SP Homebuilders, XHB

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Reader Comments (Page 1 of 1)

1-30-2010 @ 8:55PM

william lindblad said...

Good call. I don't think that anyone would expect a resurgence in the new home market anytime soon. Another factor not really mentioned here is the commercial sector.
While this remains a guess, purchase of office/retail space may not be to wise, given present economics. After market housing, with the exception of the low end, is most likely static at best. Anyone doing this market sector should remember - statistics really don't lie - it is more a case of what is read from them.

2-03-2010 @ 8:00PM

placid12001 said...

I Know!!!Let's allow more cheap labor illegal immigrants in the country so they can continue to send our revenues out through western union every friday to Mexico!That way we can continue to lose jobs and not sell or build houses or cars and soon we will be riding around on donkeys and living in mudhuts!Let's continue to eliminate the middle class like Bush wanted.It has done us great!!!

2-06-2010 @ 12:19PM

cmethrough2 said...

Your right placid12001 ! george w. was just finishing his daddy's dream of what 30 years ago old bush called his new world order. w. new this was coming and did nothing to stop it, so he and his cronies could clean up, why do you think w. changed all the bankruptcy laws before he left office? he knew!!!!!

2-06-2010 @ 12:47PM

cmethrough2 said...

With America 's job situation as it is, immigration should have been stopped 2 tears ago, when the labor index started climbing. Any time you don't have enough work for the citizens, there shouldn't be anyone brought into this country !!!and as I speak there are 138,000 immigrants coming to our country per month legally from all over the world, not just from Mexico,no one knows for sure how many ilea-gels are slipping in daily.