The Housing Market Has Stalled At 60% Of Potential, And The Banking System Remains Stressed By Real Estate Lending
Most stocks in the housing industry have declined into bear market territory and home prices are too high. Homebuilder confidence has stalled and the ptoduction and sales for new single-family homes are well below potential. The housing market is thus a re-inflated bubble that's ready to pop.
The banking industry continues to shink both in terms of number of banks and the number os employees. FDIC data shows residual non-current real estate loans, and some new exposures to construction and development loans by community banks are noted. Banks are showing mis-matched positions in securities portfolios just as spreads widen versus US Treasuries. Junk bonds have crashed and loans to energy companies are now more risky. The bottom line is that the banking system is not positioned to underwrite economic growth. Remember one thing - You can't have a bull market for stock with a bear market in bank stocks.