Simple chart to look at the relation between hew home builds, a broad housing ETF and a mortgage lender.
It demonstrates that they all have a strong correlation and that mortgage company performance is a leading indicator of housing market performance and that new build housing stocks are a leading indicator for the housing market in general.
They're very choppy right now though. Mortgage applications drop 5%, they drop 5%. Market rallies 3%, they rally.
The housing situation is much worse than it seems and it going to get much worse than that.
You can skew sales numbers pretty easily but you can't hide all the houses you want to sell while you're trying to sell them.
Supply just went up 25%.
To be clear, there is not an insane amount of houses on the market. The increase is 25% year-over-year.
But, if that trend continues, we know we're looking at a problem.
And it's only a matter of time before price will fall.
So, a more cautious point of entry into a short would be after those new stats get released.
More cautious is to wait to see how the whole thing shakes out and buy at the bottom via housing stocks.
Most cautious would be to sit on your money, wait for the bubble to pop and buy real estate once the Fed is forced to drop rates in 2023.