We have had an unbelievable boom in the real estate market ever since COVID. US housing price index up 17.6% YOY, lumber prices up 338% since the beginning of COVID, general building prices up astronomically. Anecdotal evidence shows that roofing companies have had to add on 15% in materials cost, when processing orders 3-6 months in advance. This indicates an increase of 15% per quarter for building materials. The construction/building/real estate market is booming. However, it's slowing down. The US Mortgage Refinance Index is precipitously falling. The housing price index has peaked, and seems to be cresting at that 17.6%.
The main reason to be pessimistic about the real estate market is the looming FED rate hike that will face the market. Bank spreads will decrease, putting more pressure on lending markets. Spending will contract, which will hit the real estate market hard. 30 Yr MBS have already increase to >4%, the highest since 2019. None of the economic indications bodes well for the real estate market. Therefore, I'd short it. Buy SRS
The main reason to be pessimistic about the real estate market is the looming FED rate hike that will face the market. Bank spreads will decrease, putting more pressure on lending markets. Spending will contract, which will hit the real estate market hard. 30 Yr MBS have already increase to >4%, the highest since 2019. None of the economic indications bodes well for the real estate market. Therefore, I'd short it. Buy SRS
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