Direxion Daily Real Estate Bear 3x (DRV)

[Sonnyelias]

I loaded today

[tw0122]

Inventory piles up. Exactly what the housing market needs.

Homebuilders’ inventories of houses in all stages of construction, including construction not yet started, rose to 475,000 houses in June, the highest since 2008. Supply jumped to 9 months.




So builders are aggressively adding supply to the market, no matter what the market does, and that’s good for the market, there’s nothing like lots of new supply to bring home prices back to reality, the more supply, the better. This supply of new houses ripples across the market for existing houses, as builders are competing with homeowners who want to sell.



Inventory of completed houses jumped to 98,000 houses in June, the highest since 2009. These speculative homes are essentially move-in ready, they have to be sold quickly, builders have tied up lots of money in them, and that inventory is encouraging builders to throw more incentives and mortgage rate buydowns into the fray.

This surge in spec houses, after the trough during the pandemic, is exactly what the housing market needs. People who are frustrated with trying to buy an existing house, can go out and make a deal for a move-in ready new house, at a lower-than-market mortgage rate, and come out with lower payments — and to heck with homeowners that sit on their vacant homes, hoping to run up the price spike all the way, or cling to 2022 prices. Homebuilders have to build and make deals no matter what the market is.

[tw0122]

Beautiful W formed on charts $30 bottom so if you have patience $38 by October seems reasonable

[tw0122]

Add some $37s . Home builders cracking.. What’s the Cost of Mortgage-Rate Buydowns and Other Incentives to Homebuilders? Lennar Discloses the Numbers
by Wolf Richter • Jul 4, 2024 • 18 Comments
And they’re big. That assumes their hedges don’t blow up, but that’s precisely what hit D.R. Horton.

By Wolf Richter for WOLF STREET.

When mortgage rates rose to 6% and then 7%, sales of existing homes plunged by close to 40% from 2021 and by over 30% from 2019 because sellers refused to cut their prices enough to make 7% mortgages work, and buyers lost interest. Commercial real estate has been repricing properties, and the haircuts are massive. But home sellers are not in the mood. They’re going to wait this out or whatever. So sales have plunged even as active listings and supply have risen to the highest in years.

Homebuilders, however, have to build and sell houses regardless of how high mortgage rates are, that’s their business, they cannot wait out anything. So they have gone on an aggressive program of buying down mortgage rates, even for the entire term of the mortgage (“permanent”), and of throwing in other incentives, such as free upgrades and closing-cost pickups. And sales have held up.

But it’s expensive: $47,100 per house on average: Lennar

Lennar, one of the largest homebuilders in the US, filed its 10-Q for its second quarter with the SEC last Friday. And it disclosed what these incentives cost:

In the first half of 2024, the average incentive costs, including the costs of mortgage-rate buydowns, rose to $47,100 per house sold, or to 10.1% of the average sales price, up from 9.2% a year ago.

The costs of those incentives vary by market. In Texas, they reached 16.9% or $51,600 per house. In “Other” regions, which include Florida, they amounted to 13.4%, or $81,700 per house (table from the 10-Q filing):



Lennar has also reduced prices:

“Revenues were higher [by 9%] primarily due to

a 15% increase in the number of home deliveries,
partially offset by a 5% decrease in the average sales price of homes delivered.”
The average sales price of homes delivered fell to $426,000 in Q2 from $449,000 a year earlier. The 5.1% drop, it said, “was primarily due to pricing to market through an increased use of incentives and product mix.”

And it said:

“With our ready access to capital, we have been able to adjust and capture demand by using incentives to reduce the affordability constraint.”

In its first-quarter 10-Q filing three months ago, it said:

“Homebuilders have been uniquely able to capture demand by using incentives, including interest rate buy-downs, closing cost pickups and price reductions, to unlock affordability restraints and enable purchasers to buy homes.”

On their financial statements, publicly traded homebuilders add the costs of mortgage-rate buydowns and incentives to their costs of goods sold, and therefore deduct it from their gross profit, so investors see the impact of the costs. And the GSEs (Fannie Mae et al.), when they acquire the mortgage from the builder’s mortgage company, obviously also understand the math of the buydown. So it’s not that there is anything hidden here.

But the costs suddenly spiked for D.R. Horton when its hedges blew up.

Homebuilders use complex hedges of various types in an attempt to control the risks of mortgage-rate buydowns. But last fall, during the Rate-Cut Mania, when mortgage rates plunged, D.R. Horton’s hedges blew up and needed to be restructured, triggering a $65 million charge to cost of goods sold and thereby to gross margin, which came on top of the costs of mortgage-rate buydowns and other incentives, it disclosed in January.

So the jury is still out on future incidents like this where mortgage-rate buydowns exercise their unexpected costs on income.

But these costs are not reflected in contract prices.

The Census Bureau, when it reports on new residential sales, relies on contract prices to come up with its median prices, and those contract prices are inflated by the costs of mortgage-rate buydowns and incentives.

Those contract prices were down 4% in the period of Lennar’s Q2, from the peak in the fall of 2022 and are back where they’d been in Q2 2022.

This is the latest revised data through May. Did you miss Revision Chaos a month ago? Census Bureau Revises Away 25% of Pandemic-Era Price Spike of New Single-Family Houses

[dealerschool2006]

sold DRV 46 calls @ .85 just now...bot @ .25 ...

[dealerschool2006]

DRV Jun 21 $46 calls are over double at close...

[dealerschool2006]

buying some DRV calls in the morning...

[Dragonfart]

Lets see how much manipulations are in the market to keep DRV down

[tw0122]

Office and retail property valuations could fall by up to 40%

Banks Face Growing Refinancing Risks As $1.5 Trillion Of US Commercial Real Estate Debt Comes Due



Almost $1.5 trillion of US commercial real estate debt is due for repayment before the end of 2025, leaving borrowers wondering who will lend to them. According to a note from Morgan Stanley analysts, refinancing risks are a major concern for property owners, including those with office buildings, stores, and warehouses. The analysts predict that the maturity wall is front-loaded, and the associated risks are high. They also estimate that office and retail property valuations could fall by up to 40% from peak to trough, which could increase the risk of defaults.

Small and regional banks, which were the largest source of credit to the industry last year, have experienced deposit outflows following the demise of Silicon Valley Bank. This development has raised concerns that these banks will not be able to provide finance to borrowers. The wall of debt is set to get worse before it gets better, with maturities climbing for the next four years and peaking at $550 billion in 2027.

Banks also own more than half of the agency commercial mortgage-backed securities (CMBS), which are bonds supported by property loans and issued by US government-sponsored entities such as Fannie Mae. This fact increases their exposure to the sector, which will compound the wave of refinancing coming due.

The analysts wrote that “the role that banks have played in this ecosystem, not only as lenders but also as buyers” will increase the difficulty of refinancing coming due. Rising interest rates and concerns about defaults have already affected CMBS deals, with sales of the securities without government backing falling by about 80% in the first quarter of 2023 compared to the previous year.

Despite the bleak outlook, conservative lending standards in the wake of the financial crisis provide borrowers, and in turn their lenders, with some degree of protection from falling values. Sentiment toward multifamily housing also remains more positive as rents continue to rise. One reason why Blackstone Real Estate Income Trust had a positive return in February is that the availability of agency-backed loans will help owners of those properties when they need to refinance.

However, when apartment blocks are excluded, the scale of the problems facing banks becomes even starker. According to the report, as much as 70% of the other commercial real estate loans that mature over the next five years are held by banks. The analysts believe that “commercial real estate needs to re-price, and alternative ways to refinance the debt are needed.”

In Europe, real estate issuers have more than €24 billion due for repayment over the remainder of the year. According to Bloomberg Intelligence analyst Tolu Alamutu, real estate companies are doing everything they can to delever, including scaling back investment programs, more joint ventures, bond buybacks, and dividend cuts. Disposals are also a key focus, but some recent comments from real estate issuers suggest that it’s still not easy to sell large portfolios.

Elsewhere, investors have snapped up Europe’s first subordinated bond sale in almost a month, following the market for such debt being effectively shut by Swiss regulators’ decision to wipe out $17 billion of Credit Suisse AG’s junior notes. A global index linked to so-called contingent convertible bank bonds has also rebounded, reaching levels seen before the Credit Suisse bond writedown.

In China, capital bond issuance by city and rural commercial banks during the first three months of 2023 plunged 70% from a year earlier. This development shows that smaller banks aren’t without their own challenges

[tw0122]

Multi-Tenant Apartment Building Sales Drop 74%, The Most Since 2008

BY TYLER DURDEN
SATURDAY, APR 08, 2023 - 07:00 PM
Thanks to higher interest rates, turmoil at regional banks, and slowing rent growth, sales of apartment buildings are falling at their fastest rate since the subprime-mortgage crisis, the Wall Street Journal reports.



In the first quarter of this year, investors purchased approximately $14 billion of apartment buildings - a decline in sales of 74% from the same quarter last year, according to preliminary data from CoStar Group. The drop could be the largest annual sales decline for any quarter going back to a 77% drop in Q1 2009.

The $14 billion in first-quarter sales was the lowest amount for any quarter since 2012, with the exception of the second quarter of 2020 when pandemic lockdowns effectively froze the market.

The recent drop in building sales follows a stretch of record-setting transactions that peaked in late 2021, when the multifamily sector was a top performer in commercial real estate. Cash-rich investors had a strong appetite for apartment buildings. Their top choices were in Sunbelt cities such as Dallas, Phoenix and Tampa, Fla., where rental housing is largely unregulated and rents were rising 20% or more annually until last year. -WSJ

The combination of factors noted above mean that the math for buying an apartment building doesn't pencil out in many cases - as the cost to refinance purchases has jumped along with interest rates. In some major metro areas, rents are also flat or declining, after record increases.



The Journal also notes that thanks to an upheaval in banking, it's become more difficult to finance buildings, according to investors and analysts, who say banks are either pulling back on lending or only doing so at very high rates.

But there is one type of sale most everyone expects more of: forced sales. A number of investors bought buildings in recent years with short-term, floating-rate debt. Because of rising interest rates, those loans cost a lot more to pay down than they did when building owners first borrowed the money.

The remaining balance of many floating-rate loans will come due this year, and borrowers whose buildings aren’t bringing in enough cash every month might have to sell their buildings to pay off their debts. -WSJ

"Nobody wants to take a loss when they don’t have to," according to Graham Sowden, chief investment officer at RREAF Holdings, a real-estate investment firm based in Dallas.

The trend in apartment buildings follows a similar pullback in the broader residential housing market, where home prices fell year-over-year for the first time since 2012, with sales volume declining sharply as well, for the same basic reasons.

In February, the prices of multifamily buildings dropped 8.7% vs. the same month last year according to the MSCI Real Assets pricing index.



Green Street, which tracks publicly traded landlords, found a 20% drop in building values from their late 2021 highs.

Meanwhile, brokers and investors aren't expecting building sales to pick up anytime soon - in part because of a backlog of nearly 500,000 new units that are slated to be delivered this year, the most in almost 40 years.

According to Trevor Koskovich, president of multifamily at the Northmarq brokerage firm, "We're in the very early stages" of floating-rate loans coming due this year, and various things hitting various fans.

[tw0122]

19th consecutive month with a YoY decline in sales.

This is the first look at local markets in March. I’m tracking about 40 local housing markets in the US. Some of the 40 markets are states, and some are metropolitan areas. I’ll update these tables throughout the month as additional data is released.

Closed sales in March were mostly for contracts signed in January and February. Since 30-year fixed mortgage rates were over 6% for all of January and February - compared to 4% range the previous year - closed sales were down significantly year-over-year in March. However, the impact was probably not as severe as for closed sales in December and January (rates were the highest in October and November 2022 when contracts were signed for closing in December and January).
...
Median sales prices for single family homes were down 7.6% year-over year (YoY) in Las Vegas, down 7.5% in the Northwest, and down 6.3% YoY in Denver.
...
Closed Sales Jan 2023In March, sales in these markets were down 26.5%. In February, these same markets were down 24.3% YoY Not Seasonally Adjusted (NSA).

This is a slightly larger YoY decline NSA than in February for these early reporting markets. The March existing home sales report will show another significant YoY decline, and the 19th consecutive month with a YoY decline in sales.

This was a just a few early reporting markets. Many more local markets to come!
There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/

[tw0122]

Eviction moratoriums helped keep many families in their homes during the pandemic. Those are now long gone, and new data says eviction rates in many cities have returned to or exceeded pre-pandemic levels.

Personal Savings rate by Americans at lowest level in history

[tw0122]

Home prices will keep on declining don’t buy in 2023

https://youtube.com/@ReventureConsulting

https://twitter.com/AdrianSpitters/status/1622002870211211264?s=20

Real Estate
Top 10 Cities where Home Prices will Crash in 2023
The 10 Cities in America that are most exposed to Home Price Declines this year.

Real Estate
Fed just Predicted a BIG Housing Crash in 2023
The Federal Reserve Bank of Dallas thinks Home Prices could go down by as much as 20% nationally.

Real Estate
Top 10 Cities to BUY during the Housing Crash
Not every city will have a Housing Crash. Here are the Top 10 Cities where home prices will not crash.

Real Estate
US Mortgage Market Just Collapsed
Mortgage Applications to buy a house are at their lowest level in nearly 30 years. That’s a bad sign for 2023 Housing Market.

https://reventureconsulting.com/videos/

[tw0122]

https://www.gobankingrates.com/investing/real-estate/cities-in-danger-of-housing-crisis/

Arizona Real Estate Market:
3 days agoThe Arizona housing market is experiencing a major shift. Although the median sale price was down 2.2% in February 2023 Y-O-Y, the number of homes sold dropped by 44.4%. Homes are staying on the market for longer as buyers struggle to find affordable housing with mortgage rates at a 20-year high of 7.08%.

https://m.youtube.com › watch?v=9mENwLE4V7c
Say GOODBYE! Real Estate Agents QUITTING In Droves - YouTube
TodayThe housing market slowdown is starting to cause more and more real estate agents to leave the business for greener pastures. Home sale transaction volume has nearly been sliced in half, and many... https://youtube.com/@MichaelBordenaro

https://www.houzeo.com/blog/arizona-real-estate-market/

Housing crash is getting bad..https://youtube.com/@ReventureConsulting

[Dragonfart]

It's going to be a monster!

[Dragonfart]

It's going to be a monster!

[masterofdisaster]

One of the safest plays here

[tw0122]

California Housing Market Pukes: As Sales Collapse (San Diego County -41%), Prices Begin to Swoon

by Wolf Richter • Aug 19, 2022 •
San Francisco & Silicon Valley lead. Southern California catching up. In Los Angeles, prices fell in July from June for the first since Adam and Eve.

[PennyRookie0]

It's going to take a lot for a real estate bear to turn into a winner. Investors aren't going to stop buying houses as rental properties. They will continue to take on more and more debt for "cash purchases", driving the price back up for the average American who wants to own his/her own.

Anyone who purchases DRV really needs to do some soul searching.

[tw0122]

“Housing Recession”: Sales Plunge to Lockdown Levels, Active Listings Surge, Prices Begin to Dip as Price Reductions Spike, Investors Pull Back
by Wolf Richter • Aug 18, 2022 •
Buyers moseyed away from sky-high prices but are still there, just a lot lower, while many sellers hang on to illusions.

By Wolf Richter for WOLF STREET.

Inventory and supply of previously-owned homes of all types – single-family houses, condos, co-ops, and townhouses – surged, and sales plunged, amid sky-high prices that have been made impossible by 5%-plus holy-moly mortgage rates. And so the red-hot housing market turns into a “housing recession,” as the National Association of Realtors called it today, after the National Association of Home Builders had already called it that on Monday.

Sales plunged by 5.9% in July from June, the sixth month in a row of month-to-month declines, and by 20% from a year ago, the 12th month in a row of year-over-year declines, based on the seasonally adjusted annual rate of sales (historic data via YCharts):



Sales of single-family houses plunged by 19% year-over-year, and sales of condos and co-ops plunged by 30%, according to the National Association of Realtors in its report.

The seasonally adjusted annual rate of sales in July, at 4.81 million homes, was just a hair above the lockdown-June 2020 rate. Beyond the lockdown months of April-June 2020, it was the lowest sales rate since 2014. Compared to peak sales in October 2020, sales have collapsed by 29% (historic data via YCharts):



Sales dropped in all regions on a year-over-year basis:

Northeast: -16.2% yoy.
Midwest: -14.4% yoy.
South: -19.6 yoy.
West: -30.4% yoy.
Sales dropped in all price ranges but dropped the most at the low end and at the very high end (over $1 million) for the first time in this cycle.

The drop at the high end is in part related to plunge in sales in the most expensive coastal markets in California, such as the San Francisco Bay Area (-37%), and Southern California (-37%), according to the California Association of Realtors.



Sellers and buyers too far apart on price.

“We’re witnessing a housing recession in terms of declining home sales and home building. However, it’s not a recession in home prices,” the NAR report said.

The fact that sales are plunging like this is an indication that sellers and buyers are too far apart on price, that buyers moseyed away from these sky-high prices, and these buyers are still out there, but a lot lower, while many sellers are still hanging on to their illusions, and deals aren’t happening. Sellers just pull their property off the market after a few weeks to wait for a better day.

But some sellers are getting the message, and price cuts have been spiking. In July, the number of sellers that reduced prices of their properties on the market spiked by 31% from June, and more than doubled (+109%) from July last year, according to data from realtor.com. If pricing is realistic, a sale will happen, but pricing too often is not realistic yet, as documented by the plunge in sales:



Sales volume has plunged because of unrealistic pricing. But the deals that did get done, got done at still very high prices, which is why so few deals got done.

The median price dipped to $403,800 in July, which whittled down the year-over-year increase to 10.8%. As big as it sounds, it was the smallest year-over-year increase since July 2020, after having spiked by 25% last year (data via YCharts):



Inventory suddenly comes out of the woodwork.

Active listings – total inventory for sale minus the properties with pending sales – jumped in July by 20% from June and by 31% from July last year to 748,000 homes, the highest since November 2020, according to data from realtor.com:





Supply of homes listed for sale, according to NAR data, jumped to 3.3 months at the current sales rate, the highest since June 2020, and up by 27% from a year ago, having more than doubled since January (data via YCharts):



Investors, second home buyers, all-cash buyers pull back.

Individual investors or second-home buyers purchased 14% of the homes in July, down from a share of 16% in June and May, from 17% in April, 18% in March, 19% in February, and 22% in January, according to NAR data. In other words, individual investors and second-home buyers are pulling back faster than others.

“All-cash” sales, which include many investors and second home buyers, dipped to 24% of total sales, down from a share of 25% in June and May, and down from a share of 26% in April.

Among the biggest institutional buyers of houses, American Homes 4 Rent has already laid out why it is pulling back from buying in this market where prices have started to drop in many cities where it is active amid a pile-up of inventories, particularly of new houses. “We need to be patient and allow the market to reset,” it said.

Holy-Moly Mortgage Rates don’t work with sky-high prices.

Mortgage rates – called “holy-moly” because of the sounds homebuyers make when they see the potential mortgage payment – have been between 5% and 6% since mid-April. The daily rate tracked by Mortgage News Daily today is 5.48% for the average 30-year fixed rate mortgage. The Mortgage Bankers Associations weekly measure, released yesterday, came in at 5.45%. Freddie Mac’s weekly measure, released today, ticked down to 5.13% for the most recent reporting week. These rates compare to 2.9% a year ago.

These 5%+ mortgage rates are still mind-bogglingly low, with CPI inflation at 8.5%, as the Fed is backing off years of interest rate repression. But home prices are mind-bogglingly sky-high, and the two don’t mix, and prices will have to come down to meet the buyers.

[tw0122]

Evictions, foreclosures, rising rent: ‘Trifecta for potential chaos****
Foreclosure starts were also up year over year, rising 219%****
Except this to get 500x worse in next few months..

[tw0122]

Mortgage application activity was lower last week, with overall applications declining over two percent to their lowest level since 2000. Home purchase applications continued to be held down by rapidly drying up demand, as high mortgage rates, challenging affordability, and a gloomier outlook of the economy kept buyers on the sidelines,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.

[tw0122]

Awesome! Housing market continues crash and huge $billion dollar losses already coming and plenty more on the way.

Compass Prepares for 25% Downturn in Housing Market, Plans Serious Cost Cutting, Pukes All Over the Place
by Wolf Richter • Aug 15, 2022 •

Because suddenly the SoftBank-backed company, which blew $1.73 billion since 2017, is running out of runway.

By Wolf Richter for WOLF STREET.

Compass, which calls itself the “#1 Brokerage in the US” and has for years hyped its technology, and has billed itself more as a tech company than a real estate broker, whacked folks over the head multiple times this evening:

With another huge loss, $101 million this time, bringing the total losses since 2017 to $1.73 billion – a real estate brokerage, for crying out loud!
With Q2 revenues that barely grew and missed guidance.
With shocking cuts in its Q3 revenue guidance, forecasting a 25% plunge in revenues, when analysts had expected revenue growth!
With a morsel from CEO Robert Reffkin during the earnings call: “The Fed took repeated actions, which have had the direct effect of driving down our revenue.”
With another morsel from Reffkin: “We’re preparing for the real estate market this year to be nearly 25% below where industry experts believe it would be just six months ago.”
And with a plan to cut costs, and by a lot – a company whose business model had been “growth at all costs.”
CEO Reffkin explained during the earnings call (transcript via Seeking Alpha): “There’s still buyer demand, and still prices are flat in good markets; they’re down to modestly down into the more challenged markets. But there’s no longer multi offers everywhere like we have before. Days on market are definitely increasing. And so overall, we’re still negative on outlook.”

KATHOOMPH made the shares in afterhours trading today, plunging between 12% and 20% to just over $4, having collapsed by 82% from the first trading day after the IPO in April, 2021. The shares have plunged so much that today’s afterhours debacle is barely visible (data via YCharts):



The cost-cutting thingy is funny because Compass was never designed to make a profit in the first place. It was designed to rake in cash from investors by promising them forever-growth and then blowing this cash to achieve this growth.

In its startup phase, it raised $1.5 billion, including from the geniuses over at SoftBank, and then it raised $450 million during its IPO in April 2021. Compass spent the past years going around the US blowing this money by overpaying for real estate brokerages and poaching brokers from other brokerages, promising them oodles of money and stock-based compensation to the moon, and by plowing large amounts of cash into developing its much hyped software platform, all based on the promise of forever growth – and forget profits.

But now this scenario has gotten shookalacked by the downturn in the housing market and the projected plunge in revenues.

In its prior earnings call on May 12, Compass already announced that it stopped all expansion into new markets and buying other brokerages. In early July, Compass announced it would lay off 10% of its workforce, about 450 employees.

So in today’s earnings release, it said that market conditions were “extremely challenging” in Q2. And it announced a “new cost reduction program” that would cut about $320 million in operating expenses over the 12-month period compared to the 12-month period through June. And this cost-cutting would allow them to “generate positive free cash flow in 2023” in this environment of sharply dropping revenues, yeah, they’re going to be cash-flow positive during the 25% downturn after having burned huge piles of cash during the hottest real estate market ever, yup, I got it.

“Specifically, we plan to reduce our two biggest areas of expense: technology and incentives to acquire agents,” they said during the conference call.

“If the market gets worse, we will pursue the necessary steps to achieve that goal” – being free cash flow positive in 2023 – Chief Operating Officer Greg Hart said during the conference call.

Cutting costs when your business model is “growth at all costs” is always a peculiar thing. But now as the housing market has turned down and home sales have dropped, and it’s much harder to make a sale and get the commissions, cost cutting is doubly peculiar for a “growth at all costs” company. It is in essence admitting defeat of the business model that it had hyped to investors all along.

And that’s a desperate move because investors will be fleeing, making it that much harder to raise new money to burn.

Compass has a reason to make this desperate move. It may be running out of runway. It reported net cash used in operating activities of $120 million in the first half of 2022. It ended the quarter with $430 million in cash, down from $618 million six months ago. So at this rate of cash-burn, you can count on the fingers of your hands how many quarters the company has left before the cash will be all burned.

[tw0122]

Inventory level skyrocketing to 2008 levels and worse. No denying that fall and winter going to be brutal for the housing market.

American Homes 4 Rent, during its earnings call last week, said a bunch of things that we have already seen in the data.
There is now a huge supply of new houses for sale, in all stages of construction, over 9 months’ supply in total, according to the Census Bureau

[Bman1]

My calls are hurting today! This just has to swing back with interest rates soaring and housing interest drying up. Any thoughts?

[PennyRookie0]

So what does that mean for this ETF? I've read the summary prospectus and can't figure out what needs to happen for DRV to go up. It's been essentially flat for 2 weeks after plummeting from $60+.

[tw0122]

Mortgage lenders going bankrupt

[PennyRookie0]

This strategy worked out well for me in the middle of last week. Bad timing last week could have been really ugly though.

[tw0122]

the commercial market is leading the implosion, even in so-called impervious markets, like NYC. Tons of see through space of all flavors in AAA locations, rents dropping like a rock. Masters of the Universe, like Blackstone and Simon, dumping properties BEFORE the interest rates doubled, at huge losses. CMBS is just another bond proxy, getting hammered by that wonderful mixture of rising rates and shitty collateral, a perfect formula for a cascade of Non Performing Loans, as far as the eye can see.

[tw0122]

It’s a leveraged decay trading instrument. get in a day or 2 anticipating market moves down then roll out with gains. Rinse and repeat.

[PennyRookie0]

Anyone else have thoughts on what this ETF will do? How will the pending Fed rate increase affect this?

[Mactheriverrat]

DRV - With interest rates rising and home prices falling the housing market takes a DUMP.

DRV is a GREAT bet as inflation isn't going away anytime soon which will bring on HIGHER rates from the Fed.

[tw0122]

The Fed hell bent on tipping the US economy into a recession as fast as possible to reverse inflation, needs a housing recession very soon.

[tw0122]

The housing market just slid into a full-blown correction, says top economist Mark Zandi
Housing demand is pulling back—fast—and the chief economist for Moody's Analytics has seen enough: "The housing market has peaked.

[Elgordo84]

Looks like we there !!!
I’ll take it for the ride up!!!!

[tw0122]

Is The Housing Crash Starting?

Tyler Durden's Photo
BY TYLER DURDEN
WEDNESDAY, MAY 18, 2022 - 11:05 PM
Last week, we shared extensive empirical evidence that the US housing market is starting to crack when we quoted regional managers from John Burns Real Estate Consulting, all of whom agreed on one (or more) of three things: i) Demand is slowing, namely entry-level due to payment shock; ii) Investors are pulling back; and iii) Ripple effect of rising rates starting to hit move-up market. Here are some excerpts:

Dallas builder: “Interest lists are shrinking or buyers are truly pausing.”

Houston builder: “Many first-time buyers simply no longer qualify with the increase in interest rates, as their debt-to-income ratio gets out of whack.”

San Antonio builder: “Traffic has been cut in half since the hike in rates.”

Raleigh builder: “Investor activity has slowed dramatically.”

Provo builder: “Investors are evaluating the investment more critically than in the past.”

Washington DC builder: “Traffic half what it was in March. Worried about first time buyers. Many fewer REAL buyers than number of people collected on interest list last 6 months. Certainly more attempts [from buyers] to negotiate.”

Seattle builder: “Pause by a large population of buyers. To achieve our desired [sales] pace, we had to make price adjustments. Rates starting to knock people out of qualification.”

Needless to say, a housing crash would be a bad thing for the US economy for which the housing sector is of paramount importance: a house is usually the biggest asset in American’s savings, comprises a large chunk of the labor force, and is a large contributor to inflation indices. That's precisely why the Fed, hell bent on tipping the US economy into a recession as fast as possible to reverse inflation, would want nothing more than a housing recession.

But what if Powell instead gets a housing crash on par with 2007?

If that's what is coming, we may be able to sniff it out soon in this big week for housing data in a US housing market which has been, until now, red hot. As DB's Jim Reid writes, today’s data showed that building remains strong, with houses under construction hitting an all time high, even if pending home sales tumbled as did mortgage applications.

Tomorrow it gets even more interesting: on Thursday morning we get a look at how new home construction translates to sales, which, given the precipitous climb in mortgage rates, could start facing some demand destruction. Which brings us to today's Chart of the Day from Reid, which shows that mortgage rates have taken off with the Fed’s pivot, and the post-Covid boom in existing home sales has started to wobble. Meanwhile, consensus expectations marked by the X show they will decline further tomorrow.



If the chart is correct, Reid warns that "it will be a very painful few months ahead" (for homeowners, not so much for investors as the stock market will sniff out the coming recession and soar, as it frontruns the Fed's next easing).

Of course, the bulls will still point to the strong fundamentals which underly housing: like other sectors, there is a big supply versus demand imbalance as inventories available for sale are still near historic lows, labor in the construction sector is constrained with immigration down, and millennials are aging into their peak earning and home-buying years. All while consumer balance sheets are strong.

So, as Reid concludes rhetorically, will the Fed need to lift rates such that mortgages are far above levels most home buyers have grown accustomed to, ultimately slowing blistering price growth? Or will the cracks appear much sooner (spoiler alert: yes).

One thing is certain: Housing, and its fate, will serve as the earliest guide to the Fed, rates and the US economy.

[tw0122]

Single-Family Housing Starts to Shows Serious Cracks On Top of Negative Revisions
Housing starts dropped only 0.2 percent in April but downward revisions were steep and single-family starts took a 7.3 percent hit.

Let's dive into the New Residential Construction report for April for a look at the US housing market.

Building Permits 

Privately-owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 1,819,000. This is 3.2 percent below the revised March rate of 1,879,000, but is 3.1 percent above the April 2021 rate of 1,765,000.
Single- family authorizations in April were at a rate of 1,110,000; this is 4.6 percent below the revised March figure of 1,163,000. 
Authorizations of units in buildings with five units or more were at a rate of 656,000 in April. 
Housing Starts 

Privately-owned housing starts in April were at a seasonally adjusted annual rate of 1,724,000. This is 0.2 percent below the revised March estimate of 1,728,000, but is 14.6 percent above the April 2021 rate of 1,505,000. 
Single-family housing starts in April were at a rate of 1,100,000; this is 7.3 percent below the revised March figure of 1,187,000. 
The April rate for units in buildings with five units or more was 612,000. 
Housing Completions 

Privately-owned housing completions in April were at a seasonally adjusted annual rate of 1,295,000. This is 5.1 percent below the revised March estimate of 1,365,000 and is 8.6 percent below the April 2021 rate of 1,417,000. 
Single-family housing completions in April were at a rate of 1,001,000; this is 4.9 percent below the revised March rate of 1,053,000. 
The April rate for units in buildings with five units or more was 281,000.  
Revisions

Unadjusted estimates of housing units authorized by building permits for January through December 2021 have been revised. 
Seasonally adjusted estimates of housing units authorized by building permits have been revised back to January 2016
Seasonally adjusted estimates of housing units authorized but not started, started, under construction, and completed have been revised back to January 2017. 
My charts in this post show the revisions.

Housing Starts, Permits, Completions,
The completion bottleneck is enormous

Builders are struggling getting materials and workers. Some delayed hoping material prices would fall.

Key Takeaways

A 0.2 percent decline in starts is not meaningful. The negative revisions and the 7.3 percent decline in single-family units is what matters.

The Fed is likely pleased with these numbers. Multi-family units will help with rental prices as will lagging completions.

Still, the decline does not even register on my lead chart. But with mortgage rates now well over 5 percent, the slowdown will accelerate from here.

Rapidly Rising Mortgage Rates Finally Impact the Price of Lumber, Durable Goods Are Next

On May 16 I commented Rapidly Rising Mortgage Rates Finally Impact the Price of Lumber, Durable Goods Are Next

Lumber has peaked this cycle as mortgage rates soar over five percent. A recession looms despite yesterday's blowout retail sales numbers.

I will have further thoughts on retail sales later today.

This post originated at MishTalk.Com.

[tw0122]

This softening is by design. The Federal Reserve is done watching inflation run away, and has made it a priority to cool down one of its biggest drivers: the housing market. To do so, over the past few months, the Fed has put upward pressure on mortgage rates. In December, the average 30-year fixed mortgage rate sat at 3.11%. As of last week, that rate is up to 5.27%—its highest level since 2009.

As mortgage rates rise, of course, it puts downward pressure on the housing market. If someone took out a $500,000 mortgage at a 3.11% fixed rate, that borrower would owe a monthly principal and interest payment of $2,138 on a 30-year loan. However, at a 5.27% rate, that payment would jump to $2,767. Not only are those higher rates pricing out some would-be homebuyers, but it also means some borrowers—who must meet lenders' strict debt-to-income ratios—have lost their mortgage eligibility.

[tw0122]

During much of the pandemic's housing boom, historically low mortgages shielded homebuyers, to a degree, even as home prices shot up 34.4% over the past two years. Now, with mortgage rates back up, buyers have no choice but to feel the full brunt of home price growth. In December, the typical American household would have to spend 24% of its monthly income to make a mortgage payment on the average-priced U.S. home, according to Black Knight, a mortgage technology and data provider. As of last week, Black Knight’s mortgage-payment-to-income ratio is now up to 34%. That reading, which is the highest since 2006, is giving some economists housing bubble déjà vu.

[tw0122]

5 Signs That a Housing Market Crash Is Coming 1. Home prices softening in most markets · 2. Inventory slowly picking up. 3. Confidence is declining. 4. Rise in interest rates is just in beginning stages. 5. Realtor traffic seen major slowdown throughout the US.

[tw0122]

Fannie Mae economists see home price appreciation cooling off in the next year, with the annual rate of appreciation dropping back into single digits in the second half of 2022.

The forecast calls for even more chilling in 2023, with home price appreciation dropping below the current inflation rate, which could lead to a 2023 real estate market crash.

[tw0122]

“Housing Bubble 2”
“tight lending standards?”

“Many of Christian’s customers have no savings, poor credit, or low income—sometimes all three. Some are like Joseph Taylor, a corrections officer who saw Christian’s roadside billboard touting zero-down mortgages. Taylor had recently filed for bankruptcy because of his $25,000 in credit card debt. But he just bought his first home for $120,000 with a zero-down loan from Christian’s company. Monthly debt payments now eat up half his take-home pay. “If he can help me, he can help anyone,” Taylor says. “My credit history was just horrible.””

[tw0122]

Real estate crash eminent Residential and commercial Nasdaq: OPEN), a leading digital platform for residential real estate transactions has been crashing also from $25 peak to $5 and down 7% again today
Zillow and Compass stocks have crashed in 2022.
reported that it purchased 36,908 houses in 2021 but sold only 21,725 houses (for $8 billion) during the year, leaving it Zillow was left with 17,009 unsold homes ($6.1 billion) in inventory.
Zillow did the same thing with a big portion of its 7,000 homes that were stuck in the pipeline before it quit the business last November and sold those homes mostly to institutional investors, who’re now trying to figure out what to do with them
Zillow stock collapsed when it announced that it lost $881 million in 2021 on its home-flipping escapade

Compass, a real-estate broker that calls itself “a tech company reinventing the space share price has completely crashed.

[tw0122]

Higher rates means housing industry just in beginning stages of decimation. Commercial real estate crashing

[Denisnj]

https://www.chicagobusiness.com/commercial-real-estate/hna-group-venture-owns-chicago-office-tower-files-chapter-11

[Talc Moan]

They had a Reverse Split.

[TheFinalCD]

40.78 ^ 36.67 (892.21%)

whats up with this on only 44k volume?

same with TECS but 1M+ way more volume

[Talc Moan]

Time to buy long Calls DRV. China Contagion going to Spread. Their Property Market is Collapsing.

[Talc Moan]

Direxion Shares ETF Trust - Daily MSCI Real Estate Bear 3X Shares (DRV) has 4 splits in our DRV split history database.

The first split for DRV took place on July 08, 2010. This was a 1 for 5 reverse

DRV's second split took place on November 10, 2011. This was a 1 for 5 reverse split,

DRV's third split took place on August 20, 2013. This was a 1 for 4 reverse split

DRV’s 4th split took place on June 28, 2019. This was a 1 for 5 reverse split,

[DTGoody]

Thank You! I will add SRS to my watch list as well.