Buying a House Will Be Harder Than Ever

A sign of the top in autos... Buying a house will be harder than ever... 'We're in the sixth inning of the housing boom'... Why every investor should consider options today... A 'one click' way to follow Doc's safe options advice...


We're just one day away from one of the biggest events in Stansberry Research history...

Tomorrow night at 8 p.m. Eastern time, Porter's "Metropolitan Man" will join us live in our Baltimore headquarters to explain everything you need to know about what's really happening "behind the scenes" in Washington D.C. today.

Again, if you can't make tomorrow night's live broadcast, don't worry... Everyone who signs up for this event will also get access to a full replay and transcript at no additional charge. Click to reserve your spot.

Signs continue to point to a major top in U.S. auto sales...

Yesterday, two separate industry reports showed U.S. light-vehicle sales unexpectedly plunged last month. As news service Reuters reported...

Auto industry publication WardsAuto put the seasonally-adjusted annualized rate (SAAR) for light vehicle sales in March at 16.53 million units. Industry consultant Autodata put industry SAAR at 16.62 million units for March.

That was below the 17.3 million analysts polled by Reuters had expected, and the first time since August that the SAAR – a crucial industry metric – had fallen below 17 million.

Sales have risen every year since the financial crisis, and hit a new all-time record of 17.6 million vehicles last year. But the pace began to slow in January and February, and has now fallen to the slowest annualized rate since March 2016.

As we mentioned yesterday, this is happening despite aggressive financing offers from lenders and huge dealer incentives. According to market-research firm J.D. Power, average sales incentives were more than $3,750 per vehicle in March – more than 10% of the average sticker price – the highest level since 2009. Meanwhile, the company reports that vehicles are sitting on dealer lots an average of 70 days, also the highest since 2009.

Worse, it now appears the weakness could also be spreading into truck and SUV sales, which have been a relative bright spot in recent months. As Karl Brauer, executive publisher at industry consultant Kelley Blue Book, noted to Automotive News on Monday...

Incentives have risen across the board, even on the same truck and SUV models that used to sell themselves.

Make no mistake, these problems are just beginning. Much more pain remains ahead for the auto industry.

It could be the most difficult time in more than a decade to buy a house this spring...

So says a new report from the Wall Street Journal.

The Journal cites a combination of rising prices and mortgage rates and the lowest supply of available homes in nearly 20 years. And unlike recent years, this phenomenon is no longer isolated to "hot" markets alone. From the report...

It isn't just hot spots like Seattle and Denver that are seeing scarce supplies of homes for sale but also sleepier locales like Minneapolis, Cleveland, Nashville, Tenn., Tampa, Fla., and Louisville, Ky...

Economists had predicted the inventory crunch would ease this year, as several years of solid price gains induced more sellers to put homes on the market and spurred home builders to break ground on more new homes.

Instead, inventory has gotten tighter as demand has increased rapidly and the pickup in construction has lagged behind. Sellers also have become hesitant to put their homes on the market because rising prices and mortgage rates have made it more expensive to trade up.

Our colleague Steve Sjuggerud agrees...

Longtime subscribers know Steve was one of the first analysts anywhere to turn bullish on housing nearly eight years ago. And he has remained bullish as prices have rebounded to nearly their highest levels in 10 years.

In yesterday's edition of our free DailyWealth e-letter, Steve noted that multiyear lows in housing inventories means home prices could still move much higher from here. From the essay...

I've talked about this many times... I believe we have plenty of upside in house prices – primarily because there's no supply of homes to buy.

THIS is what the builders are excited about! With no supply of new homes, they KNOW they can keep raising prices.

We are clearly not at the bottom in housing. But to my mind, with no supply of houses, we are clearly not at the top in housing either.

Steve also noted that while homebuilder sentiment has soared in recent years, history suggests the final peak in prices could still be years away...

Homebuilders were incredibly optimistic about their prospects in 2005 – right before the housing market peaked and crashed. As the market crashed, pessimism set in... Homebuilder pessimism set a record in early 2009. Take a look...

Ah, but look where we are now in builder sentiment. We are at the same levels we saw before the last major housing crash... right? Let's take a closer look at this...

Last time, house prices didn't fall into a legitimate downtrend until 2007 – a couple of years after builder sentiment peaked. On the flip side, house prices didn't genuinely start a new uptrend until 2012 – again, a few years after builder sentiment bottomed. Take a look...

Steve believes the final – and potentially most explosive – "innings" in this housing boom are still ahead...

The first inning – 2009 through 2011 – is in the rearview mirror. Now we're in the sixth inning. We should have a few more years of good times – and they could be really good times.

Stay on board in housing... It's still not too late to get in and take advantage of the significant upside we're seeing now.

Quickening sales aren't the only sign the housing market is starting to heat up again...

The latest data show homeowners are once again pulling equity out of their homes, via cash-out refinancing and home equity lines of credit ("HELOCs"). As financial-news network CNBC reported on Monday...

Fast-rising home prices gave homeowners more equity than many expected, and they are now tapping that equity at the fastest rate in eight years.

Homeowners gained a collective $570 billion throughout 2016, bringing the number of homeowners with "tappable" equity up to 39.5 million, according to Black Knight Financial Services. Those borrowers have at least 20% equity in their homes...

Cash-out refinances accounted for nearly half of all refinances in the last quarter of 2016, as homeowners withdrew $31 billion. That was the most since 2006 and represented a 50% increase from the same quarter of 2015.

Finally, we'd like to highlight some timely research from our colleague Dr. David Eifrig...

As regular readers know, "Doc" is our resident options guru. He has devoted a huge portion of his career to helping his subscribers use options the right way: to reduce risk and earn big, consistent income streams from high-quality, blue-chip stocks.

In the April issue of his Retirement Millionaire advisory, Doc explained why today is an ideal time to add his options strategy to your portfolio. In short, there are good reasons to believe the market could go much higher or much lower from here. From Doc...

On the bullish side, markets have momentum. Momentum is a real, statistical feature of markets. When markets or individual stocks rise, they tend to keep going in that direction. When markets set new highs, it's more likely that they'll set another, newer high than decline.

It turns out that if you buy the market when it hits new highs and hold for a month, you have a 91% chance of seeing it go up from there. If you hold for three months, the chance of a new high rises to 97%. If you buy at market highs, your typical one-year return would be a healthy 7.9%. (All these numbers are based on the S&P 500 from 1928 to 2015.)

On the other hand, Doc noted the market looks incredibly complacent, which is often a bearish sign for the future...

Investors seem to be buying up stocks with little thought of downside. As the market has ticked up and up, the CBOE Volatility Index ("VIX") has reached and maintained historic lows. Without getting into the minutia of how it works... just know that the VIX tracks options prices to measure whether investors think stocks are likely to fall. It's often called the "fear index." And a low number means investors aren't nervous.

Typically, when investors feel too safe (like they do now), the market will drop and remind everyone that it can move in two directions, not just one.

It's also strange to see such calmness when the political and social situations, both at home and abroad, seem to be less predictable than usual.

And Doc noted that even simple fundamental measures like valuation are sending a mixed message today...

If you look at a simple price-to-earnings ratio, the market looks more expensive than average... But if you consider low interest rates and low inflation, it looks cheap.

If you use the last 10 years of the cyclically adjusted price-to-earnings ("CAPE") ratio, stocks look very expensive. But if you adjust that for accounting changes that took place over the last 10 years, they look more affordable.

The market could truly go either way from here.

So what should you do?

Doc recommends staying long... but says it's time to start keeping a closer eye on your risk. And this is where his covered-call options strategy comes in...

Doc explained this strategy in detail in a five-part Digest series last month, so we won't rehash them all here. But the premise is simple: By selling a call option on a stock you own, you reduce your risk in case shares fall... and increase your return when shares rise slowly. The only trade-off is that you won't get as much upside if shares rise quickly.

Doc says this is an ideal strategy for today's market environment...

Even if the bull market continues for the next five years, we're overdue for a correction of 10% or more. It's inevitable at some point. You can't predict when these types of corrections will happen. But selling covered calls is a great way to protect yourself when the market stumbles.

And if stocks undergo a longer decline, that's when the covered-call strategy shines. It keeps making returns and income by selling options. Other investors simply ride stocks down.

With options, you can earn income and still stay invested so that you are in the market when it finally rallies.

There's only one problem...

While this strategy isn't complicated, it does require time and effort to learn. And not everyone is currently in a position to join Doc's $3,000-per-year Retirement Trader service to dramatically speed up the process. But that doesn't mean you're out of luck...

Doc just recommended a "one click" way to add his covered-call strategy to your portfolio today... And it's as simple and easy as buying shares of your favorite stock, no options required.

If you've been interested in trying Doc's options strategy for yourself, but haven't had the time (or money) to do so properly, this recommendation is for you. You can get all the details in the April issue of Retirement Millionaire. Click here to take advantage of a 100% risk-free trial.

New 52-week highs (as of 4/3/17): JD.com (JD), Laboratory Corporation of America (LH), and Tallgrass Energy GP (TEGP).

In today's mailbag, a subscriber in the auto business weighs in on yesterday's Digest... and several more respond to Porter's Friday request for feedback. Send your questions, comments, and concerns to feedback@stansberryresearch.com.

"'Said another way, nearly one out of three folks trading in for a new car today owes a record $5,000 more than his new car is worth... before he even drives it off the lot.' – Brill

"Want a little fun fact from the dealer side of [the] business (which some of you likely know)... that negative equity trade in of $4800... that's published trade in valuations, that is not ACV (actual cash value). Typically, we would pull large amounts of front end gross out of the new retail unit to lower cash costs on the backend (and lower commissions on front). It's not unreasonable to expect that negative ACV number to be 10-15% greater. Yowza!" – Paid-up subscriber C.R.

"Porter, I just signed up for the online seminar about the deep state. I will be listening along with a fellow Alliance Member who has already paid. I feel strongly that when a company with Stansberry's integrity goes out on a limb to offer real news even when it will alienate some of its customer base the least I can do is support it for a mere $20. I hope you make a killing on this webinar. Keep up the good work." – Paid-up Stansberry Alliance member Mark R.

"Yes, I am planning to attend! I am a large farmer from central Illinois. I'm very interested in whether you think my $10 million in assets are going to be inflating or shrinking! Thank you for putting this together." – Paid-up subscriber Ken H.

"Hello Stansberry, will you be offering a printed transcript of the briefing from the Metropolitan Man for those of us with severe hearing loss? I'd love to hear what he has to say, but I'm afraid I would be able to understand very little of the [dialogue]. Surely, I can't be the only one of your subscribers with this predicament. I'd be happy to pay $19.95 for such a transcript. Thanks." – Paid-up Stansberry Alliance member Ed S.

Brill comment: Yes... Everyone who signs up for tomorrow night's event will get access to the live broadcast at 8 p.m. Eastern time, as well as a full replay and transcript to review at your convenience. Reserve your spot right here.

Regards,

Justin Brill
Baltimore, Maryland
April 4, 2017