The Scariest Real Estate Chart In All The Land

Includes: IYR
by: Lou Basenese

If you’re tired of living in a chronic state of “information overload,” we feel you. It seems that the deluge of investment news and commentary never ceases. The good news? We’re here to help. Following the adage that “a picture is worth a thousand words,” each Friday I select a handful of charts to put some key economic and investment insights into perspective for you. So say “goodbye” to long-winded commentary, and “hello” to easy-to-understand pictures.

If You Can’t Beat ‘Em… Quit?

Poor, poor hedge fund managers…I’ve chronicled their inability to outperform the S&P 500 Index and lowly mutual fund managers twice before (see here and here). But instead of staying in the battle to the bitter end, it looks like they’re waving the white flag of surrender.

The latest report from Bank of America’s Equity Strategist Savita Subramanian reveals that hedge fund clients were the biggest sellers last week.

Now, don’t freak out and think this indicates that the “smart money” smells a correction on the horizon. It’s only one week’s worth of money flows. And we’re only talking about Bank of America’s hedge fund clients. Not all hedge funds. If a mass exodus were truly underway, we’d notice an uptick in short interest. After all, hedge fund managers don’t get paid to sit in cash. But that’s not happening. At all.

In the second half of May, short interest as a percentage of float in the S&P 1500 Index dropped to 5.5%. That’s the lowest level in over five years. So stay calm and stay long. Speaking of staying calm…

Is the Real Estate Recovery Doomed?

Sound the alarm bells! The real estate recovery is doomed. Why? Because 30-year mortgage rates just went vertical. Four weeks ago, the average interest rate stood at 3.71%. Now it’s up to 4.14%, according to the latest national survey by

If this torrid climb continues, demand is going to dry up in a New York second, right? Wrong! Mortgage applications actually rose 4.7% last week, according to the Mortgage Bankers Association. So the higher rates aren’t derailing demand one bit. Not yet, at least. And that “yet” probably won’t come any time soon, either.

Remember, back in the real estate heydays of 2006, interest rates stood at about 6.5%. And that didn’t curb buyers’ enthusiasm one bit. This time won’t be any different, especially since affordability remains near historic lows – and inventories remain depressed, too.

So stay calm and stay long the real estate recovery.