Hey There Income Hunter,

Recent economic numbers have been shockingly bad.

Just check out yesterday’s housing starts …

The combination of high prices and a doubling of mortgage rates since last fall has made home ownership less affordable for a lot of would-be buyers.

The slowdown in sales boosted the inventory of new homes on the market to a 14-year high of 444,000. The last time that many homes were for sale was in 2008.

Unfortunately things will get worse in the weeks ahead. 

Today we will look at forward looking indicators that signal a meltdown in housing unless the Fed comes to the rescue soon.

Affordability Has Tanked in 2022

Here is the killer for households … 

Homebuyer mortgage payments have gone from an average of $1,700 a month to nearly $2,500 a month (chart below)

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Pair that with real earnings (adjusted for inflation) that are a -2.5% and you get the picture on how troubled the consumer is. 

The housing market is suffering from a serious mortgage rate shock and it is having a big effect on demand. This is initially seen in the second-home market.

Second Home Demand Plunge

In the past couple of months, second home demand has decelerated dramatically from COVID-fueled increases. 

Meanwhile We Have Plenty of More Tightening Coming 

The market has taken almost a full .25% hike off the table, but as you can see in the chart below, there are still 7+ more hikes priced in.

Bring It Home

Well there may be some hope for help from the Fed … 

Yesterday Rafael Bostic, president of the Atlanta Fed, came out with the comment below.

We knew this was inevitable and I do not believe the Fed will wait until September. The consumer is drowning and now housing and jobs are showing signs of stress. 

Here is the real problem. Unless inflation comes down hard and fast it will not matter if the Fed stops tightening. 

By the way, Licia Leslie, Option Pit’s technical expert who specializes in reversal patterns using candlestick analysis has been hot lately …

 

Licia will be presenting live, along with Mark Sebastian, this Thursday at 7 p.m. We have been seeing a lot of good candlestick patterns and the timing is right to light up your brokerage account.  Click here to register.

And don’t forget …

The Fed knows they need a lower stock market heading into the June meeting so we are still in a sell all rips environment prior to June 15.

As always … 

Live and Trade With Passion My Friend,

Griff