• Skip to main content
  • Skip to primary sidebar
  • Markets
    • Helping Families Build Wealth
  • Trade Ideas
  • Reflections
  • Links
  • Trading Program
  • Income Model
    • Income Trading Blueprint
  • Watch List
  • About
    • Privacy Policy
    • Terms of Service
    • Terms of Participation
  • Login

Zach Scheidt

Helping families build wealth so they can focus on what really matters

When I Run Through My Neighborhood, I See a Housing Problem

November 5, 2024 at 11:02 am by Zachary Scheidt

Last weekend, I took a long run through one of my favorite areas of Atlanta. Along the way, I noticed something interesting: “For Sale” signs are starting to pop up everywhere.

But that’s not what really caught my eye…

What grabbed my attention were the “Price Reduced” tags hanging below those signs. I’ve seen a few more of them every week.

For the past couple of years, the housing market has been running red hot. Prices climbed to astronomical levels while inventory stayed incredibly tight. If you’ve been in the market for a house, you know exactly what I’m talking about.

But now, we’re seeing a major shift. And it could spell trouble for homebuilder stocks.

A Perfect Storm for Housing

Here’s the situation we’re facing: Home prices have been rising much faster than wages for years now. That might work in the short term, but it’s not sustainable.

Think about it… How can people keep buying more expensive homes if their paychecks aren’t keeping up?

They can’t. And that’s just the beginning of our housing market problems.

Right now, we’re caught in a tricky situation. If interest rates start falling (as many expect), we’ll likely see a flood of new listings hit the market. All those homeowners who’ve been “locked in” with their low mortgage rates might finally decide to sell.

But if rates stay high? Well, homes remain unaffordable for many buyers, especially first-time homebuyers who don’t have equity from a previous home to help with the down payment.

Either way, homebuilders could be in for a rough ride.

How to Play the Housing Slowdown

Now, since we’ve been enjoying a bull market for the last several quarters, I’ve been mostly focusing on positive stocks that are trending higher. But after a healthy bull run for certain areas of the market, vulnerable stocks can experience some nasty declines.

This could be one of those times.

Several major homebuilders look particularly vulnerable right now:

  • Lennar Corporation (LEN) has seen its stock price climb despite these housing market warning signs.
  • D.R. Horton (DHI) continues to trade near all-time highs.
  • Toll Brothers (TOL) focuses on luxury homes, which could be hit especially hard in a downturn.

All three of these companies have benefited from the housing shortage of the past few years. But with inventory rising and affordability stretched to the breaking point, they could be in for a significant pullback.

My former hedge fund mentor Bill taught me that the best trades often come when you spot a disconnect between what Wall Street believes and what’s actually happening on the ground.

That’s exactly what we’re seeing in housing right now.

A Safer Way to Play the Downside

If you’re interested in profiting from this situation, consider buying put options on the iShares U.S. Home Construction ETF (ITB). This gives you exposure to the entire homebuilding sector without taking on single-stock risk.

Put options let you profit if stocks fall while limiting your potential losses to just the amount you invest. Think of it as insurance against a housing market decline.

For more conservative investors, you might want to simply reduce your exposure to homebuilder stocks if you own them. Sometimes the best trade is avoiding losses altogether.

Remember, I’m not suggesting that housing is headed for a 2008-style crash. But with prices this high and affordability this stretched, something has to give.

The housing market might be about to learn the same lesson we see over and over in market cycles: Any area with too much speculation can be vulnerable once the excitement wears off.

Here’s to growing and protecting your wealth!

Zach Scheidt 

P.S. If you want to learn more about how to profit from market downside, check out my Speculative Trading Program.

(Trade procedure: 5 minutes after this notification posts, I will enter the trade on my brokerage platform. Once filled I will edit this post to include execution prices.)

Please note: I am placing these trades in my own account. And while I notify the group of all trades 5 minutes before I place my own personal trades, this creates a conflict of interest. Please review all disclosures and agreements included with your subscription packet.

Filed Under: Public, Trade Ideas Tagged With: $DHI, $LEN, $TOL, article, bearish plays, housing market, investing

Primary Sidebar

Top 10 Stock Picks

The Best Option Strategy to Maximize Profits

After decades of professional investing, this is the best option strategy I’ve found to maximize profits while still managing risk.

quantum computing stocks should be on your radar for trading and investing

An Investor’s Primer on Quantum Computing Stocks

Quantum computing stocks are on the move. Here are the stocks to watch and the information every trader and investor needs to know.

market bounce

Is It Time to Buy? Three Signs Point to a Market Bounce

After three weeks of declines, its time to play for a market bounce. Stocks are oversold, and trading near key support levels.

DOGE: How You Profit from Government Efficiency

DOGE is a dire threat to defense contractor revenue. But I’ve got a simple trade for you that will actually profit from cuts in government spending.

These “Trade War” Stocks are on the Move!

We’re just a few weeks into Trump’s second term, and already we’re seeing a major trade war erupting. But believe it or not, this trade war can actually work to YOUR BENEFIT as an investor!

Momentum Begets Momentum: Why This Rally Has Room to Run

The lessons I learned from Sir Isaac Newton and my old boss Bill. And why today’s market momentum reminds me how right both men were.

Five Daughters, Three Days at Universal… And One Massive Investment Trend

Affluent customers are spending big on experiences. Here’s how you can profit from this massive investment trend.

Trump’s Energy Policy Shift Will Push These Stocks Higher

I’ve been neck deep into the energy sector lately. And one area of the oil patch has caught my attention. These aren’t the flashy stocks you hear about on CNBC. But they’re the companies doing the heavy lifting in the energy world. These companies have drilling expertise… the specialized equipment… and the technical know-how that […]

When I Run Through My Neighborhood, I See a Housing Problem

I’m seeing a major shift in the housing market. And it could spell trouble for homebuilder stocks.

travel stocks

Three Travel Stocks to Pay For Your Next Trip

Spending on travel continues to be strong! Here’s how to profit…

dot plot

Mind the Dots!

The Federal Reserve’s “dot plot” will be an important market driver. Here’s what to watch as the market responds to Fed day.

homebuilder stocks

It’s Time to Take Profits on Homebuilder Stocks

Homebuilder stocks had a great run! But as investors prepare for interest rate cuts, these stocks could fall.

China stocks

🇨🇳 China Stocks — Really??

Chinese stocks have been under pressure for years. But today, Chinese stocks finally look attractive!

Death Cross Alert!

Is this falling stock in your account? I hope not!

official bear market

Wall Street HATES These Three Stocks

Investors are betting against three key consumer stocks. Here’s why these plays could be ready to hand you some lucrative profits!

DISCLAIMER: Stocks and options trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the stocks and options markets. Don't trade with money you can't afford to lose.

This is neither a solicitation nor an offer to Buy/Sell stocks or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this page. The past performance of any trading system or methodology is not necessarily indicative of future results.

All trades, patterns, charts, systems, etc., discussed on this page are for illustrative purposes only and not to be construed as specific advisory recommendations. Information contained on this site or in any correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.

Arete Publishing, LLC · Copyright © 2025 · All Rights Reserved
Privacy Policy · Terms of Service · Terms of Participation · Log in