Category Archives: cycle analysis

On December 9, 2010, in an article titled “Real Estate: The Verdict Is In”, we said the following:

“Based on the indicated sources above, we feel that real estate has a six to nine year stretch of rising prices or ‘trading’ in a range and decreased foreclosures.”

Real Estate Prices since December 2010:

Foreclosures since December 2010: 

As part of the commentary in 2010, the expectation of the 6-9 years of increasing prices is currently showing signs of fatigue as indicated in the year-over-year change of the S&P/Schiller National Home Price Index:

Nine years in and there is the increasing chance that the declining year-over-year rate of change since 2013 may be coming to an end.  Although we’d like to see the rate of increase get closer to zero we think that, more or less, the trend could moderate before exceeding the previous year-over-year highs of 2018.

Going back to that December 2010 article, we presented a chart of the Real Estate Loans, All Commercial Banks (REALLN) on a year-over-year basis.  Although December 2010 wasn’t the absolute low in the indicator, it wasn’t long before that level became a distant memory.

The points in the chart above, circled in red, are levels showing moderation in the rising trend.  Our belief is that these provide the respite that is needed and expected in a well functioning housing market.  The current moderation after the decline from the 2013 peak suggests that we’re at or near the end of the 9 year half cycle in the 18-year rising trend of real estate.

What did we just say?

We think another round of rising real estate prices is near.  While the indicator can fall further, we think that the current level has been consistent with the 18-year cycle as pointed out by Roy Wenzlick.  For this reason, we think that the next trend in real estate price will eclipse what has already been seen with year-over-year increases reaching double digit levels.  Ideally, this level of increase in real estate will occur after a 1991-like recession.

In an articled titled “America's homebuilders haven't felt this good since 1999” found on Yahoo!Finance dated December 18, 2017, it is noted that homebuilders confidence is “…now at a higher level than it was at any point during the housing bubble.”  Does this mean that a crash in the housing market is coming?

To clarify whether a crash is coming, we’ve taken the data that is referenced in the article and laid bare the elements of a real estate market cycle.  In the article it is said that the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) “…hit an 18-year high of 74, topping expectations for a reading of 70 and well above last month’s reading of 69.”

As we’ve pointed out, based on the work of Roy Wenzlick, there is an approximate 18-year real estate cycle for peaks and troughs.  When we look at the HMI chart (full cycle in red), we can clearly see that major cycle lows have an 18 year period of separation.  While this is only a coincidence, it fits well with the work of Wenzlick who confidently shows this cycle (1795-1974) in his writings from 1930-1974.

Continue reading →

On September 12, 2016, we assess the real estate market.  In this update, we’ll reconsider the points that we made to determine the progress that has been made with our analysis.  There are some surprises as we go through the limit info that is tracked.

In this assessment, we track the Housing Starts of New Privately Owned Housing Units.  At the time of the September 2016 review, we said the following:

“The latest trend from September 2015 to the present appears to show topping out action as the Housing Starts data seems to be running out of steam.  Additionally, the dotted red line in the chart shows the Dow Theory halfway point at which either the market booms higher or stalls & stutters before declining substantially, relative to the most recent rise.”

So far, the data has fallen in alignment with our claim of topping out action, as seen in the chart below.

On December 9, 2010, we wrote an article titled “Real Estate: The Verdict Is In”.  At the time, we said the following:

“As we come to the close of 2010, it appears that based on the narrow scope of sources that we’ve selected, the bottom in real estate has come and gone.”

Since that time, the real estate market has experienced what we’d consider to be a recovery.  This is a follow-up on the indicators from that 2010 article to see how far along we have come in the current recovery and where we might expect the market to go from here.

Continue reading →