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When Was The Housing Peak And How Far To The Bottom?

Monday, June 20, 2011 - 6:55 PM
Ken, MISH is another example of someone who could see the problems coming, way ahead of time.  And, he can prove it through his posts on his site over the years.  And he does (prove it).  It's another illustration of what I said a few days ago, in the post about Shiller claiming that no one could see the economic problems before they were upon us.  I found Shiller's current position very disturbing.

Note:  This article isn't an ego trip...  it's worth the read and analysis:
I called the top of the housing bubble in summer of 2005 based on the Time Magazine Cover "Why We're Going Gaga Over Real Estate" and have been updating the chart ever since, in real time.

When was the US Housing Peak?

Case-Shiller has the peak in summer of 2006. I have it in summer of 2005.

Case-Shiller is a lagging indicator. It uses a three-month moving average published with a two month lag. Moreover, Case-Shiller only looks at home resales, not condos.

Resales did not catch the action in cash back schemes, incentives, and fraud.

In summer of 2005 the condo market bit the dust in many places. Also home builders started discounting heavily. Those discounts did not show up in prices for many months, but rather in incentives such as "free" three-car garages, free granite counter-tops, free cars, etc.

Finally, there were massive fraudulent schemes starting in 2005 that overstated home prices, notably cash back to buyers at closing.

Thus, contract prices did not reflect real costs to buyers for numerous reasons, and Case-Shiller did not pick up on that immediately.

MikeMike327 posts since
Feb 22, 2010
Rep Points: 876