Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Dow Stock Market Short-term Trend Analysis - 15th Oct 19
The Many Aligning Signals in Gold - 15th Oct 19
Market Action Suggests Downside in Precious Metals - 15th Oct 19
US Major Stock Market Indexes Retest Critical Price Channel Resistance - 15th Oct 19
“Baghad Jerome” Powell Denies the Fed Is Using Financial Crisis Tools - 15th Oct 19
British Pound GBP Trend Analysis - 14th Oct 19
A Guide to Financing Your Next Car - 14th Oct 19
America's Ruling Class - Underestimating Them & Overestimating Us - 14th Oct 19
Stock Market Range Bound - 14th Oct 19
Gold, Silver Bonds - Inflation in the Offing? - 14th Oct 19
East-West Trade War: Never Take a Knife to a Gunfight - 14th Oct 19
Consider Precious Metals for Insurance First, Profit Second... - 14th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19
The IPO Market Is Nowhere Near a Bubble - 9th Oct 19
US Stock Markets Trade Sideways – Waiting on News/Guidance  - 9th Oct 19
Amazon Selling Fake Hard Drives - 4tb WD Blue - How to Check Your Drive is Genuine  - 9th Oct 19
Whatever Happened to Philippines Debt Slavery?  - 9th Oct 19
Gold in the Negative Real Interest Rates Environment - 9th Oct 19
The Later United States Empire - 9th Oct 19
Gold It’s All About Real Interest Rates Not the US Dollar - 8th Oct 19
A Trump Impeachment Would Cause The Stock Market To Rally - 8th Oct 19
The Benefits of Applying for Online Loans - 8th Oct 19
Is There Life Left In Cannabis - 8th Oct 19
Yield Curve Inversion Current State - 7th Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

U.S. Housing Market, Worst Behind Us Or Another Downleg?

Housing-Market / US Housing Dec 05, 2009 - 12:48 PM GMT

By: Tim_Wood

Housing-Market

Best Financial Markets Analysis ArticleThis past spring and summer there was a surge in real estate activities.  The consensus amongst the realtors and builders that I talk to are of the opinion that the worst is behind us.  However, the charts say we are now seeing another housing slow down.


I was able to successfully call the housing top using my methods of cyclical analysis.   The first of a series of articles on this topic was published here in the October 28th 2005 Wrap Up, in which I gave the parameters that would confirm a major top had occurred.  I also did follow up articles in early 2006 as the topping process unfolded.   The week of May 26th 2006 we saw cyclical confirmation that a major top had occurred and by July 2006 the pain was beginning to be felt.  

I specifically remember talking to builders and developers in early 2007 and they were confident that the weakness into 2006 was just a temporary phenomenon.   But, the cycles held true and it proved to be that this was a major top and not just a temporary slowdown.  

By mid 2007 the reality of the situation began to set in and by early 2009 the wrath of the real estate bubble was widespread.  I know of houses that sold earlier this year for 60 cents on the dollar from what they had previously sold for just a few years earlier.  Many builders in my area have been forced out of business.  There are still abandoned developments and the foreclosures continue.  I know first hand of cases in which people have walked away from their homes because they owed more on the property than it was worth.   In a recent conversation with a realtor that works foreclosures he explained that in January he was seeing foreclosures selling below asking price.  Now, he is seeing foreclosures selling above asking price.  

What has happened is that prices have reached enough of a low to spark speculative buying.   Because of the deep discounted price compared to just a couple of years ago, people are coming in and picking up what is now perceived as deals.  As a result, we saw a pick up in real estate this past spring and summer.  In my area we have even begun to see some new building.  But, I believe that pick up was likely a bear market rally if you will.  I still know of cases in which people are walking away from their homes.   Just as the charts and cycles were used to identify the top, I can now use the charts to help monitor the current developments and assess the health and vitality of the pick up seen earlier this year.

In the first chart below is the Philadelphia Housing Index.   It is the ebb and flow of the intermediate-term cycle, which I have noted with an “I”, that is important.  Note that as the housing boom unfolded, this cycle progressively made higher highs and higher lows.   It was then in early 2006 when price broke below the 2005 intermediate-term cycle low that served as a warning that longer-term cycles had peaked and that THE top had been seen.   As you can see in the chart below, price advanced this past spring and summer out of the most recent intermediate-term cycle low.  

However, my indicators now tell me that this cycle has likely topped.   The key will be how the decline into the next intermediate-term cycle low unfolds.  My suspicion is that we will see the intermediate-term cycle depress prices into early 2010, but that price will hold above the previous intermediate-term cycle low.  Then, once the next cycle begins to advance, optimism will again return the real estate market. 

We will see another spurt in sales and building as price moves up out of the intermediate-term cycle low in early 2010.  It will then be that next intermediate-term cyclical advance that will be of key importance and that will put the Housing Index, and consequently the housing market, at risk of a setup for another leg down to begin.  We will have more data to assess this situation with once the intermediate-term cycle low in early 2010 is made. 
 

Next I have included a chart of the Dow Jones Home Construction Index.   Here too, I have marked the intermediate-term cycle lows with an “I”.  Here too, we have seen a bounce out of the low that was made earlier this year.   Based on my Cycle Turn Indicator, which is not pictured here, the intermediate-term advance has most likely run its course and the technical outlook here is pretty much the same as with the Housing Index.

The bottom line is that we should expect further weakness in this sector into early 2010.  It will be the developments that follow in the wake of this weakness that will be key in determining whether or not housing has made a longer-term lasting low, or if this was all just a flash in the pan.   Given the still fragile state of the economy, the ongoing credit crisis, continued stream of foreclosures, business failures, bankruptcies, etc, it is far too early to say that the real estate market has made a lasting low.   Just as the charts were used to identify the top, they can be used to identify the bottom and at this time we do not, in my opinion, have sufficient data to say that housing has bottomed and with the fundamentals as bleak as they are I would argue that the data there is pretty much the same. 


I have begun doing free Friday market commentary that is available at www.cyclesman.info/Articles.htm so please begin joining me there.  The specifics on Dow theory, my statistics, model expectations, and timing are available through a subscription to Cycles News & Views and the short-term updates.  I have gone back to the inception of the Dow Jones Industrial Average in 1896 and identified the common traits associated with all major market tops.  Thus, I know with a high degree of probability what this bear market rally top will look like and how to identify it.  These details are covered in the monthly research letters as it unfolds.   I also provide important turn point analysis using the unique Cycle Turn Indicator on the stock market, the dollar, bonds, gold, silver, oil, gasoline, the XAU and more.   A subscription includes access to the monthly issues of Cycles News & Views covering the Dow theory, and very detailed statistical based analysis plus updates 3 times a week.

By Tim Wood
Cyclesman.com

© 2009 Cycles News & Views; All Rights Reserved
Tim Wood specialises in Dow Theory and Cycles Analysis - Should you be interested in analysis that provides intermediate-term turn points utilizing the Cycle Turn Indicator as well as coverage on the Dow theory, other price quantification methods and all the statistical data surrounding the 4-year cycle, then please visit www.cyclesman.com for more details. A subscription includes access to the monthly issues of Cycles News & Views covering the stock market, the dollar, bonds and gold. I also cover other areas of interest at important turn points such as gasoline, oil, silver, the XAU and recently I have even covered corn. I also provide updates 3 times a week plus additional weekend updates on the Cycle Turn Indicator on most all areas of concern. I also give specific expectations for turn points of the short, intermediate and longer-term cycles based on historical quantification.

Tim Wood Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

K.V.Varghese
08 Dec 09, 12:37
US Housing Scam

Since the great depression of 1927 the US government has intervened to provide an umbrella to make the American Dream for housing a stick against all principles of economics. The truth is that the average US citizen out there can never afford or eligible to live in those American Dream houses. He is incapable of earning himself for paying it.It is the same Utopian ideas of erst where Soviet Union to give its citizen cradle to grave State Paradise. The mighty giant that challenged post war world is now history. The demise of the dollar and decline of the US are written on the walls for the same reasons.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules