Every day, more and more people are losing their homes to foreclosure. In fact, a new foreclosure filing occurs every 13 seconds! That’s 6,650 a day, or 2,427,250 a year!
There have been various government programs put into place to counteract the rising foreclosure problem, but these programs are obviously not working.
Rapidly increasing foreclosures creates a vicious cycle. As foreclosures continue to increase, the net affect is increasing downward pressure on home values. As people’s home values decrease, they are less likely to fight as hard to keep their homes, causing an increase in foreclosures. You can see where this is headed.
But how does this relate to day trading? Read on to find out.
Rising foreclosures, and shrinking home values are very important to day traders, especially in today’s economic climate. Why? You already know the answer:
That’s right, rising foreclosures and shrinking home values have far reaching effects that create massive volatility in the markets. And this volatility creates day trading opportunities.
There are several economic indicators that are directly related to the housing market. In fact, it could be argued that the Housing-related indicators cause more market turbulence than do employment indicators (I know, that’s a bold statement, but one I believe to be true).
For example, there are several housing-related announcements and indicators that are directly impacted by the rising tide of foreclosures. Existing Home Sales, for one, is dramatically impacted by increasing foreclosures. But maybe not in the way you would think.
Heavy foreclosures can actually have a POSITIVE impact on existing home sales. Think about it – the more foreclosures there are, the more inventory there is available, the cheaper the prices are, the more affordable home ownership becomes.
The major problem with this indicator is that it is strictly based on the number of existing homes sold, and doesn’t take into account the ratio of homes/inventory, which would give us a much better perspective of the health of the housing market.
If 500,000 homes are sold from 1.5 million in inventory, that is indicative of a much stronger housing market than if 1 million homes are sold from an inventory of 4 million.
But to the casual observer, 1 million in homes sold seems much better than just 500,000.
Another housing-related economic indicator that you should pay attention to is New Home Starts. This indicator is typically negatively impacted by rising foreclosures – the greater the inventory of cheap existing homes available on the market, the less likely someone is going to be to build a new home.
This not only affects the housing market, but the construction market as well, which then impacts the manufacturing and raw materials markets, and on down the line.
So you can see, rising foreclosures has a far-reaching economic impact, and thus a heavy impact on the markets. And what does all the volatility created by housing stress mean for a day trader?
But only IF you know how to take advantage of it!
To discover how YOU can learn to take advantage of the upcoming market volatility, simply enter your name and email address into the following form, and you will receive a FREE copy of our e-Book The Guerrilla Trader – Classied Insiders’ Report.
