Reality Strikes in the form of…BAD HOUSING DATA

The rah rah crowd on financial TV must be befuddled. The market was up for the past week as investors drank the rally Kool-Aid. Banks, retail, housing and other consumer related stocks rose. Many thought we had seen the bottom – but as Bill Fleckenstein often says, we still haven’t fixed the central problem – too many people own more house then they can afford. And this must be corrected with falling prices, more foreclosures, and bankruptcies.

Housing Crumbling Further

Witness today’s headline on the most recent housing data:


Sales dropped over 15% and prices dropped over 6%. Remember, the real estate bubble and the reckless lending precipitated by easy money over the past 8-9 years has caused an enormous real estate bubble that surpassed the relatively tame bubble of the late 1980’s and early 1990’s. My personal expectation then is that this correction must be BIGGER than the one we experienced back then in order to clean all this up. And back then, my hometown of Somerville, MA experienced a 34+% price drop peak to trough (source: This should serve as a reference for my thesis.

We will not get out of this easy…good luck out there!

Chris Grande

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