Housing Affordability in 6 Charts
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In episode one of The LongVol Show I discussed some of the data surrounding household debt and student loan debt. There are some new charts that I think are interesting that I want to get into this Saturday.
Housing affordability is at all time lows and the debt levels are at highs – something has to give.
Let’s dive into 6 charts that tell a story.
Household Debt
First let’s start with this chart of auto loans, credit card and student loan debt.
Student loan debt is and just has been on the rise really since I exited high school; the era of ‘degree required’ has produced a debt bubble like we’ve never seen before.
In fact, in 2012-2013 one of my first big shorts on a desk was a long winded short on University of Phoenix ($APOL) and Corinthian Colleges ($COCO): both every bad actors.
But it’s the credit card debt that has my attention.
We just broke the 2020 highs and are well above the 2009 highs and that is worrisome.
Bank of America Checking Balances
Liz Ann Sonders of Charles Schwab (my first employer on Wall Street) tweeted this out earlier this week and it was of interest.
While the savings is still higher than 2020 we’re clearly on a downtrend from the 2020 peak and that is something to watch.
Credit Card Balances - $1 Trillion
Moving back to credit card balances. We have hit past the $1T mark as of July.
Not a great look with draining checking and savings balances decreaasing.
Robinhood: Users Declining by -17%
Now this is an interesting one. Robinhood ($HOOD) just reported earnings a few weeks ago and while they missed it was other data that caught my attention.
Options trading volume was also down -5%. But it’s more the fact that they are losing active users.
Is that a lack of money or are people just wisening up to getting a better broker?
Housing Affordability: Worst on Record
And finally the housing affordability index.
I you missed The LongVol Show episode 1, I talked about my housing shorts.
Not a good look.
Debt to Income Ratio for Homebuyers
A chart presented without too much comment needed.
Final Word
Everyone interprets the data differently like I said in the recent LongVol show but to me, it’s clear.
Something has to give here.
The big issue as I see it is the inflated housing prices we’re seeing and I’ve been pretty candid within our DeltaOne community on my concerns about the idea of “you can just refinance later” as a solution.
To be clear: that just simply is not going to work with inflated pricing as most will, in my opinion, be negative equity when rates do fall and supply hits the market.
This is not intended to be a forecast for the physical housing market but moreso for the publicly traded companies.
Thanks for reading.
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Final Quarter of 2024 Stock Market
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About the Author
Daniel Bustamante is the founder, managing partner, and CIO of Bustamante Capital L.L.C., a multi-strategy hedge fund management firm based in San Juan, Puerto Rico. He has over 10 years of experience in the financial industry, specializing in equities, futures, and event-driven trading strategies.
He is also the founder of TheLongVol.com, a blog and newsletter that shares his insights on his investing process, travel, and other private investments. He has been featured in Bloomberg, Arizona Business Journal, Business Insider, Yahoo! Finance, Forbes, Seeking Alpha, and other publications over his career on Wall Street.
