We went from being bullish to bearish on housing for the simple reason that when the data goes from "good" to "less good," housing related equities start to decline. And while the U.S. housing sector has had a great run, its momentum has been slowing for several months now.
Case in point: This week's Pending Home Sales data contracted -2.5% sequentially in January, which brings the rate of year-over-year growth to its lowest since late 2014.
Why does this matter for housing related stocks? We may be "on the cusp of a negative inflection point for home prices," points out Hedgeye U.S. Macro/Housing analyst Christian Drake, as flagging housing demand (aka Pending Home Sales) "leads price growth by 9 to 12 months."
Click on the chart below to enlarge:
Equity markets will continue to discount this reality.