Three "Red Flags" That The US Housing Slowdown Is Accelerating

One month ago, we showed three prominent "red flags" that the US housing market was starting to roll over.

Among these were a report by real-estate advisory RealtyTrac, which cited by Bloomberg, said that "almost nine years after the housing-market bust helped trigger the most recent recession, RealtyTrac senior vice president Daren Blomquist sees the industry waving a red flag." He was referring to house flipping by third party investors at auction which was back with a vengeance, and what's worse, the share of foreclosures snapped up by inexperienced mom-and-pop buyers at auction had hit a record 31% in June. As he said, "this a redux of the same fervent speculation that pushed the housing bubble."

The second warning came as a result of the latest sharp decline in spending on furniture and home goods stores, which according to Bank of America credit and debit card spending data, showed that the yoy drop had reached the lowest since the recession period. As BofA said then, "this shows that consumers have delayed spending on housing-related items, which could be a sign of weakness for the housing market."

The third red flag was revealed in the then-latest Credit Suisse survey of real estate agents: "Our Buyer Traffic Index took a sizeable step back in June, slipping to 41 from 52 in May, indicating traffic levels decidedly below agents’ expectations.... Prospective buyers also continue to be deterred by a persistent shortage of affordable inventory across markets, with agents frequently highlighting buyer pushback to rising home prices. On the other hand, agents repeatedly mentioned that low mortgage rates were crucial to supporting demand."

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Fast forward one month and we find that the adverse trends observed in early July have gotten progressively worse, and we can now add one more.

First, as we showed last week - and correctly warned that last Friday's retail sales report would disappoint - the latest "BofA Internal Card Data Shows Significant July Spending Slowdown" showed in addition to another broadly week month of consumer spending, that "we are seeing a continuation of the theme that we flagged in last months’ report – sales at home improvement and home goods stores are weakening based on the BAC card data. After a brief gain last month, sales at home improvement stores tumbled in July, leaving sales down 3.4% yoy. Sales at home goods stores continue to weaken as the yoy rate reached a new cyclical low in July. We see a similar weak trend with sales at furniture stores." As BofA said last week, this would be a key advance indicator that the US housing recovery has stalled.

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