Note the following:
1.) Prices increased for 15 years.
2.) Prices have been in negative year over year territory for two years now -- and the rate of decline is increasing.
Let's say it again -- we're nowhere near a bottom in housing.
Wednesday, January 28, 2009
A Note On Home Prices
Click for a larger image. Graph is from Calculated Risk
Note the following:
1.) Prices increased for 15 years.
2.) Prices have been in negative year over year territory for two years now -- and the rate of decline is increasing.
Let's say it again -- we're nowhere near a bottom in housing.
Note the following:
1.) Prices increased for 15 years.
2.) Prices have been in negative year over year territory for two years now -- and the rate of decline is increasing.
Let's say it again -- we're nowhere near a bottom in housing.
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7 comments:
The absolute magnitudes of the decreases corresponding to the percent declines would be informative. As the base decreases, the magnitude of the decline required to yield a given percentage decreases also. Likewise, declines of a constant magnitude yield increasing percentages of declines. One would expect that the percent declines would decrease rapidly as housing values stabilize. This is best viewed as the second derivative of the rates of decline or the rate of change in the rates of decline.
Bonddad,
long time lurker first time poster. Thanks for your excellent technical analysis.
But I don't understand your comments on this graph. you underlined a 15 year period and said that we had a 15 year run in prices...but this is a year over year chart, and much of the first 5 years is below the line--which means that prices were DROPPING, not rising, right?
I think you can only claim a 10 year runup in prices. You can claim a 15 year runup in the rate of change, right?
It makes sense to me just the way the 2nd comment, by anon, except that beginning of 96 to beginning 07 would be 11 years, and it could be stretched to early 94 to first of 07 for 13 years. No way for 15.
Housing prices peaked in 2006? Not around here. More like June 2007.
According to the graph, prices continued to increase through 2007. Bonddad seems to like using these year-over-year charts, which means that anything above the line is still an increase--so housing didn't start decreasing until at least jan of 2007, on average in the composite 10 and 20 markets.
By far the biggest economic cycle is the twenty year housing cycle. It has been very regular for a very long time. The Kondratieff cycle is likely just relative size of the crash after the end of the second or third twenty year cycle in a row. See Business Cycles: History, Theory and Investment Reality by Lars Tvede. - Traderjohn
TraderJohn, you took the words off the tips of my fingers. The graph shows very clearly a housing cycle boom and bust, the last bottom of which happened in early 1994. Add 18 years (the average length of a Kuznets or housing cycle, not 20) and the next bottom should happen in 2012. While nominal valuations should stabilize and then slowly rise, I don't expect real valuations to rise until after the next Kondratieff cycle hits bottom, which could be as late as 2018 (I subscribe to Michael Alexander's idea that the K-cycle is now 72 years long instead of the traditional length of 54 years long).
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