Betting on Another Housing Downturn

This is the calm before the storm of the next housing crash. As the pendulum continues its down swing, expect more fallout across a broader number of housing markets. For the enterprising investor, the upcoming “double dip” presents an unprecedented opportunity to profit.

Zero Hedge presents the case for a second leg to the housing crisis and a lack of government regulation has provided yet another chance for investors to reap tremendous profits. Remember credit default swaps?

The banks will get hit again, but they’re not dummies. They’ve been building up capital reserves by dramatically reducing lending to small businesses and individuals. As they are preparing for another big hit to their balance sheets, only the supremely credit worthy stand a chance to get approved. The second housing crisis will force many banks to take another big hit against their balance sheets as the value of their mortgage holdings takes another big hit, and they are preparing for this eventuality. You’ll also notice that the spreads on CDS are much tighter than before the downturn; however, there is still room to profit here.

The growing deficit will undoubtedly lift the housing kimono once more before a true recovery can begin. The storm clouds are slowly gathering, so don’t delay. Act now and lock in your profits for episode two of real estate crash!

If you’re not yet convinced, compare the current trajectory of the housing bounce to recent downturns in this Case/Schiller Housing Index chart from an article on alternatives to the huge bank bailout:

home value history graph

For further discussion on this topic, see:

Here’s one chart from the S&P release that’s a related and updated version of the one above:

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