Housing update 2015

After identifying the bull market top in this sector of the economy in 2005/2006, and then watching it collapse. We did a lot of work, while many were bearish, discovering which of the multitude of indicators were important in anticipating a bear market low. As a result we have written several reports over the years. The latest one should lead back to the previous reports: https://caldaro.wordpress.com/2013/05/26/us-housing-update/.

When the double bottom, we had been anticipating, arrived in 2011, we waited for a new bull market confirmation, which occurred in early 2012. Since then our leading and coincident indicators have remained bullish. In fact they continue to rise.


Building permits have risen from a 2011 low of 542k to 1102k in 2014/2015. While they continue to remain somewhat depressed, compared to the past 50 years: http://research.stlouisfed.org/fred2/series/PERMIT. We expect them to rise to about 1500k before this bullish cycle ends.


Home builder bullish sentiment has increased from a low of 8% in 2009 to a recent high of 58% in 2014. As long as it continues to rise we see the bull market in housing continuing. Historically, housing prices rise for 6 to 12 months after both of the above indicators have already turned bearish.


New home prices, which drive existing home prices, have increased from a low of $250k in 2011 to a recent 2014 all time new high of $384k. That is over 50% in just three years: http://research.stlouisfed.org/fred2/series/ASPNHSUS. The average sales price of all homes sold in the US http://research.stlouisfed.org/fred2/series/ASPUS is now at record highs as well. Even the Case-Shiller index, which measures the cost of home building excluding inflation, has risen 29% since its 2012 low. This has already exceeded our expected 25% increase.


With mortgage rates remaining low, household debt as a percentage of disposable income at multi-decade lows: http://research.stlouisfed.org/fred2/series/TDSP, homeownership levels still on the decline: http://research.stlouisfed.org/fred2/series/USHOWN/, and the relatively low level of single family houses sold, this bull market could continue a lot longer than most are anticipating. Best of luck in your real estate investing!

CHARTS: http://stockcharts.com/public/1269446/tenpp

About tony caldaro

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29 Responses to Housing update 2015

  1. jobjas says:

    Tony, what does IYR track – seem to have completed 5 waves since 2009 low

  2. Lee X says:

    Thanks Tony

  3. jobjas says:

    Tony,Is there any index or data for Canadian housing market ? Thanks

  4. mjtplayer says:

    Using the Case-Shiller National Home Price Data:

    The top was July 2006 at an index value of 184.62
    The bottom was Feb 2012 at an index value of 134.03


    Now, take a look at Martin Armstrong’s long-term real estate cycle chart, first published in 1979. Calling for a major top in early 2007 (he was off by just 6 months). A collapse into 2012 – which happened. Then a large rally into 2015, which has also happened. After a “lower high” here in 2015, down we go. It’s not a absolute chart, so those of you who don’t know how to interpret his work, don’t think that prices are going down to 1950’s levels. It simply means that as a cycle, real estate will be a lousy relative investment till the relative bottom in 2033.

    It could simply mean that prices trade up and down, in a range, for decades with the 2006/7 top being the point of reference – i.e. the top of the range. Interpret the info as you will, trade or invest against Martin at your own risk.


    • torehund says:

      Agree mjt, with Martins track record its pretty difficult to bet for the opposite. He also recently assisted his mother in selling the family house.

      Tony thanks for another excellent review. If I am to comment on the development in housing; there is just too much chart damage long term, and we observe similar development for both crude-oil and the Euro.
      A 30 percent retrace is what one would expect from a prolonged bear-market. Nevertheless, if one looks internationally on the issue, a strengthening dollar could make it favorable for overseas investors to hold US-housing vs Europe housing.
      The bubble here in Norway hasn’t popped yet, But I guess it will when reality gets grimmer and crude prices plummets anew.

      • torehund says:

        Looking at the last chart (monthly) it has been a long and exhaustive climb to above zero, and if we see macd pointing down and retesting the low, we know that the slump will most likely be a multi decade experience.

        • tony caldaro says:

          From there levels would agree.
          But expecting another spike higher before it tops.
          A rise in long term rates may push in those who have stayed on the sidelines.

          • torehund says:

            That could very well happen, and on the macd there will be C-3 with 3 equal length upturns on macd if the macd reaches right above 50 on the monthly, and makes a slightly lower high. The monthly macd is now residing where good gains are to be made, the concern is that it has been a long and exhaustive climb, so how long kan it keep itself above zero ?

      • tony caldaro says:

        A strong USD keeps foreign investors involved in the US reality market.
        As they have been since 2011.

  5. rc1269 says:

    thanks Tony! good stuff. prices up 10-12% in much of Seattle metro area just since Thanksgiving

  6. mjtplayer says:

    Thanks Tony. I think housing is in the process of topping here in 2014 – 2016, depending upon the neighborhood/location. If the bond market is topping (interest rates bottoming), that is a major headwind. Add to this the lousy economy, which I think rebounds this summer but falls back to low/zero growth later this year and early 2016.

    The main reason housing prices have bounced back, other than a natural recovery, are 2 fold: record low interest rates & the high-end outperforming, which skews the data a bit. Mind you that prices, generally speaking, are lower today than the top in 2006 and possibly putting in a “lower high”.

    During the housing bubble, the common 30yr fixed rate was in the 5% – 5.5% range, helping to fuel that bubble. When rates increased in 2005 & 2006, that was it. A 6% or 7% mortgage is far different than a 5% mortgage. Same story today, with 30yr fixed rates being as low as 3.25% – 4.25% for the better part of 3 years now. What happens when rates rise to 5% on the 30yr fixed? or 6%? The housing rally is over.

    If rates begin to rise and continually rise over many years, this will retard any housing gains. Perhaps, over the next 10 – 15yrs, housing prices remain in a trading range? You’re near the high of the range now, the low maybe 10% – 15% lower after we top, depending upon the market. You could see a 15% – 20%, high to low, trading range over many, many years (even decades) in the face of rising rates. So far, the statistical price high was 2006/7. Maybe we get back there, maybe not. But that area could be the high of the range for decades – it’s already almost 1 decade now.

    • $$$NEWBIE$$$ says:

      mjtplayer, I like your analysis thanks.

      Tony, thanks for all the analysis you do.

    • tony caldaro says:

      we’re just watching the leading indicators for clues

      • mjtplayer says:

        Leading indicators? How about a 40% collapse in lumber prices since Feb 2013.

        Lumber prices lead housing prices by 2 years, housing prices lead the economy by 1 years. For example:

        – Lumber tops in 1997, housing tops 2 years later in 1999, economy tops the following year in 2000. Economy bottoms 2 years later in 2002.
        – Lumber tops in 2004, housing tops 2 years later in 2006, economy tops the following year in 2007. Economy bottoms 2 years later in 2009.
        – Lumber tops in 2013, housing tops 2 years later in 2015? Economy tops the following year in 2016? Economy bottoms 2 years later in 2018?


  7. ariez5 says:

    Thanks. 2nd question: Why do you think Lumber is crashing? Have you charted the correlation between lumber prices and housing starts?

  8. A very much alternative view from Mark Hanson – http://mhanson.com/archives/1788

  9. ariez5 says:

    Tony, Do you think this is a large B wave since 2011 or that a new Bull Market has begun?

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