Is this the true bottom?
Things are no where even close to previous recession levels, from 1991, 1982, 1975, 1970. I'll just leave it at that.
Yes, the trend has changed. Unfortunately trend changes in charts don't make a REAL estate recovery. This is STILL the WORSE 5 years of housing activity since most BUYERS and SELLERS have been alive. And it will be the worse 10 years, and likely the worse 20 years.
Of course its a GREAT market for those people who are only looking at last year, but sadly, that isn't how the housing game is played.
What would you consider a "true" bottom? It's lowest point in history ever? The best time to buy something is when everybody isn't buying. If you wait until eveyone is in, the prices are probably nearing peak again.
The line for "average number of homes sold" has been rising in general for those past 40 years. Not everybody needs a new house (there is also more limited space to build more new houses over time).
And every line on the chart is now trending upwards. That signifies a bottom passsing.
From the article you linked:
housing has improved somewhat from the post-crisis lows
Last edited by Zippyjuan; 01-26-2013 at 07:09 PM.
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Yes, this way a low point in the longer term bear market in housing, we are seeing the beginning of a cyclical bull, but we are 5 years past the pivot and barely coming off the temporary bottom. The housing cycle trends which the chart clear shows, are 10 year cycles from trough to trough (or peak to peak). As you can see, the current trough's peak was in 2005. There is your 8 years. If we have an extended cycle, at best we'll get another 2 years to the next peak around middle of 2015 some time.
So unless you are betting on another fed run like from 1992-2005, what you are facing here is not the beginning of a new 5-8 year primary bull run (still embedded within a secular bear). No, what you are facing is a bull trap that in my view will see a quick run up to trend lows (or probably just shy), and then yet another reversion back to mean secular bear trend. So this bull is more likely a calf, that will have one good year (this year) and turn back around to the primary bear which is due historically in another year and a half.
See the 2002 recession that never happened? Yeah, now you are gonna see the inverse of that starting in the middle of 2014 and running down past these lows and MAYBE hitting the secular bear bottom some time in 2018-2020. That is pending the resolution of the debt overhang of the currency, and unfunded liabilities, + whatever crap gets added on between now and then.
Bottom line. Housing took way to long to start a recovery, and the cycle went right through any upturn that would print a recovery. Yes, there needs to be a recovery before a bull. We haven't recovered from these lows. We haven't recovered from the lows housing cycle of the last 40 years. Yes, the arrow is signalling up, but that just probably means look out above you cause shits still falling off the ceiling.
also, since you mentioned actual homes sold. That line looks flat to me. One thing you will notice is the compression between the index (or starts) and homes sold. Historically that compression ratio is about 50% of starts -> sold. So in this potential recovery, we can expect to see starts run away from sales. So just on data alone, looking at starts is not the best way to gauge a recovery due to the compression factor. Each of the last 3 true recoveries saw quick correction once that compression ration began exceeding 50%. That is, when too many houses were built the market naturally corrected.
I suspect that will happen this time as well and in a very pronounced way. That is, the exuberance in new home starts will quickly fade as the actual sales lag. This I believe has the very remarkable effect of, the more crap they build, the less likely it is to be sold.
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If you really want advice, I'd have a whole hell of a lot more questions to answer with you rather than just, is the market at the bottom. Consider all the people that bought houses no where near the bottom. It's pretty clear that buying at the bottom is NOT the main factor in determining how people decide to get in.
That being said, I'd assumed this thread was for people looking to play in the market, not have a place to live. I am also assuming that people reading this thread aren't homeless AND qualified to purchase. So my advice at this point is to do what the vast majority of people are doing, and that is stay put.
There is no reason to rush out and buy a house right now because of a blip in a chart.