As per the Commerce Department report released a few months ago new home sales have collapsed 14.5% to an eight month low. While industry insiders blame everything from unusually cold weather to baby Jesus for this catastrophic drop, the reality is quite simple. The real estate market is slowly rolling over into a massive bear leg (stage 3) after it’s “dead cat” bounce between (2010-2014). I have outlined all of this in my comprehensive report dating back to October of 2013. Real Estate Collapse 2.0 Why, How & When Thus far, it’s playing out exactly as I predicted.
Here is what most people don’t get. Secular bear markets do not move in straight lines nor do they move fast. Just as bear/bull cycles in the stock markets last 17/18 years, same applies to the real estate cycles.
- Real Estate Bull Market: Arguably, the US real estate boom began at 1991 recession bottom. It lasted until 2006/07 top or 17 years. Stock market equivalent: 1982-2000 bull market.
- Stage 1 – Initial Bear Market Leg In Real Estate. 2007-2010 (3 years). Nationwide, prices declined 20-40%. Stock market equivalent: 2000-2003 Bear Market. The Dow declined about 40%.
- Stage 2 – Real Estate Bounce. Also known as the “Dead Cat” bounce 2010-2014 (4 years). Stock market equivalent 2003-2007 bull market.
- State 3 – Real Estate Collapse: 2014-2017. Stage 3 collapses are notoriously sharp, fast and very nasty. The stock market equivalent would be the bear market of 2007-2009 when the Dow lost 56% of it’s value in 18 months.
Conclusion: While the analysis above is fairly simplistic, it is also extremely accurate when we take our mathematical, timing and cycle work into consideration. The analysis above clearly indicates that the real estate market/sector is about to eat dirt in a massive and a severe Stage 3 decline. This is further confirmed by the undying love for Real Estate in today’s American culture.
Remember, before any bear market terminates itself any sense of “love for an asset class” must be crushed out of the prevailing culture. I am afraid we are at least a decade away from that point when it comes to the American Real Estate.
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Reuters Writes: New home sales dive to eight-month low in March
WASHINGTON (Reuters) – Sales of new U.S. single-family homes tumbled to their lowest level in eight months in March, dealing a setback to the housing market recovery.
The Commerce Department said on Wednesday sales dropped 14.5 percent to a seasonally adjusted annual rate of 384,000 units, declining for a second consecutive month.
February’s sales were revised up to a 449,000-unit pace from the previously reported 440,000-unit rate.
Economists polled by Reuters had forecast new home sales at a 450,000-unit pace last month.
Compared to March last year, sales were down 13.3 percent, the largest decline since April 2011.
The housing market has been slammed by an unusually cold winter, higher mortgage interest rates and a shortage of properties that is limiting options for potential buyers.
House prices, whose increases have outstripped wage gains, are also weighing on the sector.
New home sales are counted at the signing of contracts. Last month’s surprise decline could still be reflecting some of the impact from the cold weather. Sales plunged in the Midwest and the South. They also fell in the West, but rose in the Northeast.
Data on Tuesday showing a mild decline in home resales last month had offered hope the housing market could be stabilizing.
The inventory of new houses on the market increased 3.2 percent to 193,000 units in March, the highest since November 2010. While the stock of new houses on the market has come off a record low hit in July 2012, it remains less than half of its pre-recession level.
March’s weak sales pace pushed the months supply of houses on the market to 6.0, the highest level since October 2011. That was up from 5.0 months in February.
The median price of a new home last month rose 12.6 percent to $290,000 from March last year.