We told you yesterday that we bought more puts on XHB and we continue to stay the course with our thesis that housing is about to decline. We monitor information for a variety of sources so let’s take a look at some incoming data. From CoreLogic:
The CoreLogic Market Risk Indicator (MRI), a monthly update of the overall health of housing markets across the country, predicts that Crestview-Fort Walton Beach-Destin, FL is at a very high risk (70%-plus probability) of a decline in home prices over the next 12 months. Bremerton-Silverdale, WA; Bellingham, WA; Boise City, ID and Reno, NV are also at very high risk for price declines.
Corelogic.com
The CoreLogic link contains some interesting insights around pricing around the country and would suggest a prudent investor take a look at the updates.
The housing market in Florida is essentially dead given hurricane Ian destroyed large areas of the state.
We are seeing housing declines in many parts of the country but the pain doesn’t stop there. The Federal Reserve is still intent on raising interest rates possibly up to 4.6% in 2023 and there are two more FOMC meetings in November and December.
Here is an update of our XHB crash comparison chart. We noted that we are long XHB $55 strike PUTS. We’ve been paying about $5 for premiums so we won’t be profitable until XHB drops below $50 by January 19, 2024.
And here is a more direct comparison.
The chart above shows the similar patterns between the decline in XHB ETF in 2006 thru 2009. The pattern is eerily similar and we adjusted the XHB current values to map to the values back in 2006. We are about a third of the way on the journey so we’ll keep an eye on this and see how the next third over the next few months pans out.
As always, exercise caution when investing and speak with an investment professional. Please also visit our disclaimers page and note that our investment activity is our own and not advice on what anyone should do with their investments.
We’ll keep you posted but in the meantime stay tuned and stay solvent…