Saturday, July 02, 2005

Time to short the housing market

I have tried not to comment on the housing market on this blog. But I can't resist anymore, what with me getting the equivalent of a tip from the cabbie 2 times in a week. I cannot tell you exactly who urged me to invest in real estate since he or she may end up as a reader of this blog at some point, but I can tell you that there were the usual obvious truths mentioned - a house is a home! (so is a shopping cart if you can decorate it well enough!), real estate never goes down over the long term (and I believe in Santa!), land is limited (ever heard of high-rises ?) etc.

Insiders have already sold huge amounts of stock in various home-builders. The volume has crossed the billion dollar (yes, with a b!) mark recently. Recent warnings from Trex and Jacuzzi indicate that a massive slowdown is coming soon.

Now that the Australian real estate market has turned cold, and house prices are actually declining, you won't hear about it from friends. The same is true for UK, where prices are still going up, but the rate of increase has slowed dramatically. In fact, a recession in UK is now certain.

If a slowdown in China (and yes, they have a real-estate bubble of their own) occurs at the same time, we will have a global synchronized recession.

The only fillip for housing in the US may come from the recent validation by the courts of eminent domain clauses. This should allow big-business to go on a rampage and bulldoze houses, especially of those who cannot afford to fight back, and create demand for new homes! Yes, that is the cynic in me speaking!

A good way to short the housing market, especially if you bought a house in the last 2 years in the various bubble territories around the world, is to use hedgelets at Hedge Street.


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