Housing To Take A Hit

Apr. 27, 2020 11:52 AM ETSPY, VNQ, RQI, IYR, RNP, RFI, ITB, XHB, KBWY, XLRE, NRO, SCHH, FREL, JRS, SRVR, DRN, ICF, NAIL, HOMZ, USRT19 Comments

Summary

  • Home purchases in March had their biggest decline since November 2015.
  • Some say a crash is inevitable at this point.
  • With this disinflationary shock, inflation-protection assets will struggle.
  • I do much more than just articles at The Lead-Lag Report: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »

"In 2007, in the early 2007, everybody saw the housing market was falling, and at any given moment a lot of people thought it was going to fall more, and a lot of people thought it was going to rebound. You just didn't know." - Lloyd Blankfein

We're starting to see some of the cracks in the housing market. Alongside rising unemployment, massive weekly jobless claims, and stay-at-home orders, the spring housing market is going to struggle. We had the recent existing home sales numbers for March, and in typical economic fashion these days, they were ugly. As the coronavirus pandemic has shut down much of the U.S. economy, it is not a surprise to see the most significant part of the housing market showing a steep decline. Sales of previously owned homes declined 8.5% in March, the biggest month-over-month decline since November 2015. Expectations by economists were for a 7.5% decline, but even that wasn't enough. Spring is a time of year where home sales usually surge, as the spring buying season is pivotable for the market. As I mentioned in The Lead-Lag Report, the downward surge in the latter half of March is a definite harbinger for what is going to happen in April, where things are most certainly going to get worse.

Some signs point to an inevitable housing market crash at this point. Inventories in the U.S. are sharply declining, leading to a supply shock. Wage growth is non-existent in this economy, and there are tens of millions of layoffs happening, leading to an incredible demand shock. As sales decline, prices will have to drop, and as people cannot meet their mortgage payments, they will be forced to sell. It's an unfortunate situation we are likely to find ourselves in. A lot of consumers will be deferring mortgage payments to try to stay afloat, but that can only last


Subscribers warned to go risk-off Jan. 27. Now what? 

Sometimes, you might not realize your biggest portfolio risks until it’s too late.

That’s why it’s important to pay attention to the right market data, analysis, and insights on a daily basis. Being a passive investor puts you at unnecessary risk. When you stay informed on key signals and indicators, you'll take control of your financial future.

My award-winning market research gives you everything you need to know each day, so you can be ready to act when it matters most.

Click here to gain access and try the Lead-Lag Report FREE for 14 days.

This article was written by

Michael A. Gayed, CFA profile picture
27.37K Followers
Anticipate Corrections and Volatility with Award Winning Research
5x Dow & Founders Award Winner. Risk-On/Off $RORO, Junk-On/Off $JOJO, & $ATACX Portfolio Manager. Anticipate Crashes, Corrections, & Bear Markets With The Lead-Lag Report. Sign Up For 2 Weeks Free.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This writing is for informational purposes only and Lead-Lag Publishing, LLC undertakes no obligation to update this article even if the opinions expressed change. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. It also does not offer to provide advisory or other services in any jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Lead-Lag Publishing, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

Recommended For You

Comments (19)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.