Raging U.S. Housing Bull Market, House Price Inflation Breaks Above 13%, 2014 OutlookHousing-Market / US Housing Nov 27, 2013 - 04:39 PM GMT
The latest U.S. house price data released yesterday for September shows U.S. house price inflation momentum has continued to soar to an annualised rate of more than 13% well beyond the expectations of even the few bullish market commentators at the start of the year, whilst the bears are left to wallow in a state of perma-tripe that continues to go completely contrary to what has actually been transpiring during 2013.
U.S. house prices continue to soar to a momentum rate that is significantly beyond my trend trajectory for US house prices to target a trend of 10% per annum, with longer term expectations for US house prices to rise by at least 30% by early 2016.
What are the Implications if Momentum Going into 2014?
I would not be surprised if current strong momentum is sustained into data for February 2014 to be released in April 2014. Therefore U.S. house prices could be rising at an annualised rate of more than 16% per annum! However, such momentum would NOT be sustainable and WOULD give way to a correction to an inflation rate of under 10% and I would not be surprised if it falls to 7% by July 2014 data to be released in September 2014.
So, my expectations are now for a continuing strong rally into April 2014, to be followed by a sharp slowdown in price rises as U.S. house prices consolidate for the remainder of the year, which I am sure will be taken by many perma-bear clueless commentators to imply that the housing boom is over when in reality it would just be the US housing market unwinding from an very overbought state in preparation for their next leg higher that targets a rise of at least 30% by early 2016.
US House Prices Forecast Conclusion - As you read this, the embryonic nominal bull market of 2012 is morphing into a real terms bull market of 2013, with each subsequent year expected to result in an accelerating multi-year trend that will likely see average prices rise by over 30% by early 2016, which translates into a precise house prices forecast based on the most recent Case-Shiller House Price Index (CSXR) of 158.8 (Oct 2012 - released 26th Dec 2012) targeting a rise to 207 by early 2016 (+30.4%).
So whilst US house prices may be currently soaring well beyond my expectations of Jan 2013. However, when compared against expectations of far more prominent market commentators such as Peter Schiff of just a few months ago, who's expectations were literally for a CRASH, the US housing market is literally galloping up a mountain of worry.
By Peter Schiff - concluding -
Of course the real risks in housing center on the next leg down, in what I believe will be a continuation of the real estate crash. We can’t afford to artificially support the market indefinitely. When significantly higher interest rates eventually arrive, the fragile market will again be impacted. We saw that movie about five years ago. Do we really want to see it again?
U.S. house prices now stand 13% higher on the published data (Feb 2013) at the time of Peter Schiff's article, and therefore US house prices would need to fall by 13% just for Peter Schiff to break even on his US housing market expectations. Though off course when U.S. house prices do eventually correct, then such 'technicalities' will be ignored by the mainstream financial media, as is usually the case.
So what is it that the likes of Peter Schiff are missing ?
After all it is very easy to construct a bearish argument, I can do it very well, perhaps even better than most of the perma-bears, such as drawing on the the prospects for rising interest rates, after all U.S. treasury yields have been steadily rising for a while which has been picked up the perma-clueless crowd as a signal for a housing market CRASH that is just NOT going to happen! I mean the rate of inflation is not even going to slow for another 6 months, never mind actual FALLING house prices!
What many remain blind to is the fundamental driver that has remained constant for the PAST 5 years for stocks which is the exponential inflation mega-trend, the primary consequences of money printing debt monetization programmes that all governments are engaged in an attempt to buy votes through deficit spending, which feeds the exponential inflation mega-trend, which even manifests itself in the highly doctored official CPI data that under reports the real rate of inflation that people actual experience. So whilst the current U.S. CPI stands at a highly beguilingly mild 1.2%, however this STILL resolves in an EXPONENTIAL Inflation Mega-trend.
As I pointed out near 4 years ago in the Inflation Mega-trend ebook (FREE DOWNLOAD), governments only have one answer which is to PRINT MONEY! No matter what names it goes by, be it called QE, or government bonds, it is all money printing that results in Inflation against which asset prices are leveraged and oscillate around.
Ensure you remain subscribed to my always free newsletter for ongoing in-depth analysis, detailed trend forecasts, and strategies attempting to protect from and capitalise on the exponential Inflation mega-trend.
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Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of four ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series.that can be downloaded for Free.
Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
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