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A Key Reason Why Housing Will Crash

Top 4 largest occupation sectors in the United States all in the low wage service sector paying $10 an hour or less…(MyBudget360.com)

I have been making this argument ad nauseum. But housing bubble bulls have not just rose-colored glasses on, but they are blind. From the link above:

People have a hard time wrapping their minds around the economic fact that the top employment sectors in the United States are all made up of occupations in the low wage service sector. We define low wage as a job that pays $10 an hour or less. The press doesn't really highlight this working poor segment of our society even though a large percentage of our population is employed in an industry that pays very little and offers scant benefits (if any)

This is why the first-time buyer segment of the market has plunged from 40% of unit sales historically to under 30%. And this under 30% of a MUCH smaller sales pie (click to enlarge):

Does that look like a "recovering" market? The homebuilder "sentiment" index was released today and it not only missed expectations but it dropped from 57 in January to 55 this month. The "prospective buyer traffic" index plunged from 44 to 39 - 39 is a very bearish reading by the way. Of course, the National Association of Homebuilders blamed the drop on the weather. BUT, the region which was most affected by cold weather during the measurement period - the northeast - saw its "prospective buyer" metric rise from 43 to 48.

The housing market is getting ready to fall hard. Both the poor fundamental economic condition of the most important buyer demographic - the first-time buyer- and the collapse in the oil economy are going blow-torch the housing market.

The company in my most recent homebuilder report - Chapter 11 Candidate - is going to hit the wall either this year or next. It is carrying well over $300k in debt per home sold now and it's cash level is vaporizing. This is a home-run short-sell/put option play.

Look at this way, despite all-time low mortgage rates and the availability now of 0% down payment mortgages in many areas, home sales are declining - and have been in general since July 2013. Despite the NAR's misleading data to the contrary, inventory is piling up, especially in the over $750k price segment.

Disclosure: The author is short DHI, KBH, RYL.