Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Housing Market Heads South and S&P 500 Crashes Through Bear Market Low!

Housing-Market / Financial Crash Nov 23, 2008 - 05:25 PM GMT

By: Money_and_Markets


Best Financial Markets Analysis ArticleMike Larson writes: Last Thursday was a historic day for the market. The Standard & Poor's 500 Index plunged by 6.7% to 752.44. The bear market low of October 2002 was 768.63 — and we sliced through it like a hot knife through butter.

Stated another way, every last penny of profit an investor earned — even if he bought at the absolute low six years ago has been wiped off the map. And if you bought the S&P just over a year ago? You've lost more than HALF your money.

Martin and I wished these days would never come. But we did not allow those hopes to deter us from predicting them. Indeed, just a few short months ago — in our Safe Money Report and here in Money and Markets — we warned that the market would AT LEAST fall to its 2002 lows. Now that has happened.

Why? All the powerful forces we have been warning you about have converged in one time and one place. The slumping economy. The debt market crisis. Huge financial sector losses. Crashing corporate earnings. And most importantly, a deepening crisis in housing.

Speaking of which … everyone knows the housing market is hurting. I've been talking about a meltdown scenario for more than three years. And unfortunately, many of my warnings have come true.

What you may NOT be aware of, though, is just how suddenly — and how severely — the market has downshifted … AGAIN. The very latest, hot-off-the-presses numbers are so amazingly bad … so horrendous … that I wanted to make sure they didn't get lost in the clutter.

Indeed, if you're trying to buy or sell a house, or if you're an investor who owns any stock even tangentially tied to the housing market, you need to know what's going on.

Housing Disaster #1: Builder Confidence, Buyer Traffic Falling off the Table

Every month, the National Association of Home Builders (NAHB) surveys builders on the front lines of the industry. It asks them about sales, buyer traffic, and expectations about the future. And then it produces indices that sum up the results. Get a load of what the November numbers showed …

In November, the NAHB builder's confidence index hit its lowest level … ever.
In November, the NAHB builder's confidence index hit its lowest level … ever.
  • The overall index plunged to 9 in November from 14 in October. Not only is that a 36% decline — in just one month — it also leaves the NAHB index at the lowest level ever (the data goes back to 1985). 
  • Among the sub-indices, the one that tracks current single family home sales dropped to 8 from 14 … the one measuring expectations about future sales held steady at a record low of 19 … and the one measuring prospective buyer traffic fell to 7 from 11. In other words, the details of the report are just as ugly as the headline.
  • Regionally, builders couldn't catch a break. The Northeast index dropped to 11 from 16, the Midwest index slumped to 7 from 13, the South index fell to 11 from 16, and the West index plunged to 6 from 11. There was no sign of strength anywhere in the country.

Bottom line: Anyone looking for a glimmer of hope for the housing market won't find it in the latest figures. Builders are universally gloomy about the state of their business across all regions of the country. Readings on buyer traffic and current sales fell sharply, while expectations for future sales held at their record low from October.

The credit crunch is part of the problem. But so too is the broad deterioration we've seen in the U.S. economy in recent months. Some consumers can't afford to buy homes because they can't access mortgage financing or because they have lost their jobs. Others don't want to purchase because they're worried home prices will fall further.

Housing Disaster #2: Purchase Loan Applications Plunge

Most buyers don't pay cash to purchase homes. They take out mortgages. So naturally, the volume of applications for loans to buy homes can be used as a LEADING indicator of future home sales. And the news there points to shockingly bad future sales.

The MBA's weekly loan index shows that the demand for mortgages is drying up.
The MBA's weekly loan index shows that the demand for mortgages is drying up.

The Mortgage Bankers Association's (MBA) weekly purchase loan index plunged 12.6% in the week of November 14. At 248.50, it's the lowest since the week of December 29, 2000.

Now here's the thing: The MBA figures do some crazy things around the holidays. You often see big increases and big decreases in the weeks around Christmas and New Year's because of the difficulty of seasonally adjusting the figures. For example, the 12/29/00 week I mentioned above showed a 21.4% drop in purchases … but the week of 1/5/01 showed a 33.9% rise.

If you EXCLUDE the December 2000 spike down to adjust for that fact, you'd have to go all the way back to … another holiday week, the week of 12/31/99, to find a lower reading. And if you exclude THAT holiday-distorted number, you won't find a lower purchase applications reading since March 1999 — almost a decade ago!

Bottom line: Demand for home purchase mortgages is drying up. That means home sales are going to take another big leg down.

Housing Disaster #3: Home Construction, Building Permit Issuance Hits Lowest Level in Recorded U.S. History

The Census Bureau began tracking home construction and building permit issuance in 1960. Back then, Dwight Eisenhower was the president of the U.S. … the book “To Kill a Mockingbird” was first published … and the Dow Jones Industrial Average began the year trading at 679.35.

And according to the latest numbers, the housing industry is now building fewer American homes than it was back then. The full details

In October, housing starts hit their lowest level in recorded history.
In October, housing starts hit their lowest level in recorded history.
  • In October, housing starts were running at a seasonally adjusted annual rate of 791,000. That was down 4.5% from September, down 38% from the year-earlier reading, and down 65.2% from the January 2006 peak. This is the lowest level in recorded U.S. history. 
  • Building permit issuance is a future indicator of construction activity. After all, you can't build a house until you've pulled a permit. In the month of October, permitting activity plunged even more than housing starts — down 12.1% to 708,000 units at a seasonally adjusted annual rate. That's a whopping 40.1% off the year-ago level, down 68.7% from the September 2005 peak, and also the lowest level ever found. 
  • Breaking it down by property type, single-family starts dropped 3.3% to 531,000. Multi-family starts dropped 6.8% to 260,000. Single-family permitting activity dropped 14.5% to 460,000, while multi-family permitting dropped 7.1% to 248,000.

Lower construction activity is necessary to bring supply back in line with demand. And builders have made some progress in reducing new home inventory for sale.

But with unemployment on the rise, mortgage credit harder to get, and the broad economy slowing, housing demand is sliding. That should necessitate an even lower level of starts — hard to imagine given that we are already seeing the lowest level of activity in recorded U.S. history.

Quit listening to the Pollyannas — Listen to the DATA

I've been hearing “bottom” calls on housing for the greater part of the past two years from the Pollyannas on Wall Street and in Washington. Every single one has proven to be wrong … dead wrong. And this latest data tells a very grim tale.

Indeed, every single indicator — starts, permits, mortgage purchase applications, builder confidence — indicates that the already struggling industry has taken a header in the past couple of months.

So if you're looking to buy a house, drive a hard bargain. You definitely have the upper hand.

If you're looking to sell, be realistic. The market stinks. You have to price your property accordingly.

And if you're holding stocks in the construction sector, the mortgage lending sector, or any other sector tied to building and lending, what are you waiting for? If you didn't listen to my initial, urgent “sell” recommendations more than three years ago, get the heck out now!

Until next time,


This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit .

Money and Markets Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules