**[investwise]** US: Knocking At The Doors Of A Double Dip!

 

Heads up, folks! It's time for a very important housing market update from the front lines. More than a year ago in these cyberpages, I told you that housing was stabilizing. All my indicators pointed to an improvement in conditions — less deadweight inventory on the market ... increased sales rates ... stabilization in pricing.   Many housing and housing-related stocks ramped after that alert came out. Some even hit multi-month and multi-year highs! And staying short during that period would've killed your portfolio.   But now? The times they are a-changing once again. The reason? The lousy economy is pulling the rug out from under housing!   No Job = No House   My previous view of stabilization in housing was always predicated on economic improvement. As long as massive job losses were gradually subsiding ... and consumer confidence was returning ... cheap house prices and cheap mortgage rates would offset other negative forces. And sure enough, for most of the past year, conditions gradually improved.   But in the past few months we've seen the economy take a turn for the worse. Confidence is flagging and most importantly, we aren't creating any real jobs! Sure, Census workers are banging on doors around the country and collecting government paychecks for a while.   The private sector, though, is barely hiring at all ...   Many companies are still firing people left and right. The "all in" unemployment rate, that includes discouraged and underemployed Americans, is almost 17 percent!   So I don't care how low prices fall, or how cheap mortgage financing gets. No job = no house.     Here Comes the Housing Double-Dip The latest housing numbers clearly show this new dynamic playing out ... Existing home sales dropped 2.2 percent in May, compared with expectations for a gain of 6 percent. The supply of homes on the market actually rose slightly from year-ago levels to 3.89 million. New home sales collapsed a whopping 32.7 percent in May to a seasonally adjusted annual rate of 300,000. That's the lowest level in the history of data collection, which goes back to 1963. Prices slid almost 10 percent from a year earlier. The National Association of Home Builders' index, which tracks how builders perceive market conditions, tanked to 17 in June from 22 in May. That was much worse than the economists were expecting, and it was the sharpest drop in any month since November 2008. The Mortgage Bankers Association's purchase loan application index just touched 167.80. That was down from 270.70 a year earlier and the worst reading since 1997. Oh, and one of my favorite indicators — the price of lumber? It's taking an Acapulco cliff dive! Lumber futures prices have plunged from $327 per 1,000 board feet in late April to around $180 now. Folks, that's a 45 percent collapse in two months!   Bottom line?   It's once again time to ramp up the search for short sale and put option candidates in housing-related industries.   Meanwhile, if you haven't already considered liquidating some of your stock positions and paring down your risk, don't wait any longer. The risk of a double-dip in housing and the economy is rising fast. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.   Nothing in this article is, or should be construed as, investment advice.

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