### US Existing Home Sales Insights In June, home sales closed with a 30-year fixed mortgage rate of 6.77%. Homes are now averaging 27 days on the market, up from 22 days. First-time buyers account for 30% of sales, which is below the historical average of 40%. Additionally, 29% of sales are all-cash transactions. An economist pointed out that years of low supply are driving home prices to record highs. Home construction isn’t keeping up with population growth, making it harder for first-time buyers to enter the market. Increasing supply is essential for getting more first-time buyers involved in the coming years. With the recent decline in home sales, we see a chance for bearish opportunities in housing-related equities. Fewer transactions will directly affect the revenues of homebuilders and real estate services companies. As a result, we are considering buying put options on ETFs like the SPDR S&P Homebuilders ETF (XHB) to take advantage of potential declines. ### Home Builders Sentiment Recent data from the National Association of Home Builders shows that their sentiment index dropped to 43 in June 2024, marking the second month in a row below the break-even level of 50. This suggests builders are feeling pessimistic about the market, reinforcing the reported sales weakness. This lack of confidence within the industry supports our negative outlook. The slowdown mentioned by Michalowski is also apparent in commodity markets, giving traders another perspective. Lumber futures, which indicate construction demand, are currently trading around $460 per thousand board feet. This is more than 60% lower than their 2022 highs. We see this as a strong indication of falling demand for new builds, aligning with concerns raised by Yun. The ongoing lack of supply is creating a unique situation: prices are at record highs, but sales volume is low. This clash between high prices and low activity raises market uncertainty and potential volatility. We believe that option strategies, like straddles on the iShares U.S. Home Construction ETF (ITB), could be beneficial, as they profit from significant price changes in either direction. Moreover, the weak housing market may impact the Federal Reserve’s monetary policy. Historically, when housing shows considerable weakness, it often leads to a more lenient approach to interest rates. We will be closely watching derivatives related to federal funds futures, as ongoing housing issues could increase the likelihood of future rate cuts. Create your live VT Markets account and start trading now.

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