Weekly Raid #36 - Honey we Shrunk the Housing Market
Happy Tuesday Traders
We have a short trading week this week, but that doesn’t mean there won’t bee some serious opportunities for us.
Lets jump in
News of the day
Slow news day, and actually a slow news week.
We have some factory order data out at 10 a.m. this morning and then a few different bond auctions at 11:30 and 1 p.m. today. I don’t see any of these supplying any serious volatility on the day. Just something to keep an eye on. Slow event risk days are nice, they allow for a different pace of tape for the entire day.
Macro-wise, well buckle up, Today we are looking at housing.
A few weeks ago reports came out that said housing affordability is at a 20-year low. That was followed up by another report that said it was at its lowest point since the late 80’s. Now this is only shocking to the pinheads in charge, the rest of us who are actually in the market know that.
What makes this particular time odd, at least from a data point of view is the housing inventory, there still isn’t any.
Listings never really returned to their pre-pandemic levels. This is partly due to rate increases, if you have a 3.99% mortgage, why would you look for something with a 7.99% mortgage? You will more than likely just keep what you have and try and make due.
Now add on top of that all the rumors circulated about Blackrock and Citadel trying to buy all the homes to create a “renter class” and its tough to know where BS stops and facts begin.
While it is true that some of the big banks are scooping up homes, it would be nearly impossible for them to purchase enough to really make a meaningful difference nationwide. Is it possible? Sure. It is likely? I don’t think so.
That being said regionally they can definitely make an impact, but if you live in an area they are playing it’s most likely a big city where the majority rents anyway.
This is all well and good, but what does it mean for trading? Well, I do think we are heading towards a housing drop again, it’s just how these cycles work. There has already been a significant increase in time on the market which is a solid indicator that the buying frenzy is slowing down. I don’t think we see a significant break though until banks require a full 20% down again. That breaks the majority of Americans and brings these things back down to reality in my estimation.
Eventually, these things all catch themselves up. It will be good in the long term for everything to really cool off. There will more than likely be some short-term pain, but with preparation, it’s nothing that can’t be weathered.
All data was provided by Redfin
On to the watchlist.
First up is DIS today. I am still keeping an eye on this after last week’s trade. Thursday to Friday netted 60% on some credit spreads and we are jumping premarket. I will be watching the yearly VAL for some signs of continuation south or a potential reversal. It’s a short week so play out longer on your options as premiums are messed up usually on shorter weeks.
Next up is XOM, we are dropping back to VAH on the year premarket today. This is an area I would want to watch to see if we drop back into the yearly range or if we pause and consolidate here before a push higher. With oil potentially being a headline topic again, a push higher is definitely a possibility.
Finally, I am watching TSLA as we dropped back inside the yearly Value Area. Keeping with the theme If we break through August’s POC to the downside We have relatively low volume baked in until around the $200 handle with a yearly POC just below. Watching to see how volume does on the day. The thing with TSLA though is that if you miss the move you are just late. This can move 6-10% a day like it’s nothing. It’s fun to trade but can be painful if you're not quick enough.
As always trade well and good luck