Charting the Housing Market   (April 13, 2012)


By a number of measures the housing market has not recovered.

I asked frequent contributor Chartist Friend from Pittsburgh to apply his technical insights to the housing market. His charts and observations are illuminating:

I've looked at the charts a little further, and the pattern that emerges is this: fatal collapse - attempt at resuscitation - imminent reading of the last rites.

In technical terms that would translate to "a" wave breakdown (in most cases to new lows), "b" wave correction/pullback to previous support neckline, then "c" wave to lower lows.

It saddens me to have to report that, even with mortgage rates at historic lows, the American housing market is dead.

Let's start with the backbone of affordability, the mortgage rate. The Federal Reserve has pursued two strategies of resuscitation: lower interest rates so mortgage rates have fallen to historic lows, and purchase impaired mortgages to clear the system.

In this chart depicting the mortgage debt change from the previous year, we see that the year-over-year change in mortgage debt skyrocketed in the bubble and plummeted in the post-bubble collapse. Despite the Fed's $1 trillion purchase of mortgages and super-low mortgage rates, mortgage debt has barely budged.

In terms of housing prices, year-over-year price change in the 10-city Case-Shiller Index recovered sharply from the bottom but has once again turned down.

The Consumer Price Index (CPI) measure of housing costs (once again, year-over-year change) has traced out a similar pattern of sharp recovery and renewed decline. Recall that the CPI uses "owners equivalent rent" as the basis for calculating housing costs.

Housing starts--the key metric of building activity and employment in residential construction-- bounced from the post-bubble lows but remain at historically depressed levels.

Single-family home sales sharply rose as prices fell and "short sales" (in which the bank sells the home for a price which is less than the outstanding mortgage) paid with cash (reflecting investor activity) rose to 25% to 30% of many markets.

Lennar Corporation, a large home builder, can be viewed as a proxy for the home building sector. The stock has recovered but has traced out a bearish flag pattern and appears to be close to rolling over. This may reflect the realization the housing recovery has stalled.

Add all these charts up and we get a snapshot of a housing recovery that seems to have stalled or rolled over. The reasons why are apparent: mortgage debt remains elevated, a vast "shadow inventory" of underwater or foreclosed homes remains off the market and household income has stagnated or declined, as reported in What If Housing Is Done for a Generation?.

Thank you, Chartist Friend from Pittsburgh for your assistance and insights.


Planning your spring garden? Longtime oftwominds.com supporter Everlasting Seeds has a deal for you. At my request, Everlasting Seeds prepared a variety pack of non-hybrid seeds just for small gardeners like myself. If you've never planted a garden but always wanted to give it a try, this is the perfect opportunity to get started. Longtime gardeners will enjoy trying a different mix of veggies.

The Simple Garden - Special price: $29.95 + $8.00 shipping (USPS Priority Mail, insured and tracked)
Contains 30 seeds of each:     Corn     Broccoli     Pea     Onion     Radish     Carrot     Cabbage     Tomato     Cauliflower     Spinach     Lettuce     Pole Bean






Resistance, Revolution, Liberation will be available in a print edition later in April; buy it now as a Kindle eBook for $9.95.

We are like passengers on the Titanic ten minutes after its fatal encounter with the iceberg: though our financial system seems unsinkable, its reliance on debt and financialization has already doomed it.

We cannot know when the Central State and financial system will destabilize, we only know they will destabilize. We cannot know which of the State’s fast-rising debts and obligations will be renounced; we only know they will be renounced in one fashion or another.

The process of the unsustainable collapsing and a new, more sustainable model emerging is called revolution, and it combines cultural, technological, financial and political elements in a dynamic flux.

History is not fixed; it is in our hands. We cannot await a remote future transition to transform our lives. Revolution begins with our internal understanding and reaches fruition in our coherently directed daily actions in the lived-in world.






Readers forum: DailyJava.net.



Order Survival+: Structuring Prosperity for Yourself and the Nation (free bits) (Kindle) or Survival+ The Primer (Kindle) or Weblogs & New Media: Marketing in Crisis (free bits) (Kindle) or from your local bookseller.

Of Two Minds Kindle edition: Of Two Minds blog-Kindle





"This guy is THE leading visionary on reality. He routinely discusses things which no one else has talked about, yet, turn out to be quite relevant months later."
--Walt Howard, commenting about CHS on another blog.


NOTE: gifts/contributions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Daniel D. ($100), for your outrageously generous contribution to this site--I am greatly honored by your support and readership.   Thank you, Martin H. ($25), for your exceedingly generous contribution to this site--I am greatly honored by your support and readership.




Or send him coins, stamps or quatloos via mail--please request P.O. Box address.

Subscribers ($5/mo) and contributors of $50 or more this year will receive a weekly email of exclusive (though not necessarily coherent) musings and amusings.

At readers' request, there is also a $10/month option.

The "unsubscribe" link is for when you find the usual drivel here insufferable.

 
 
Your readership is greatly appreciated with or without a donation.
For more on this subject and a wide array of other topics, please visit my weblog.

                                                           


All content, HTML coding, format design, design elements and images copyright © 2012 Charles Hugh Smith, All rights reserved in all media, unless otherwise credited or noted.

I would be honored if you linked this essay to your site, or printed a copy for your own use.


                                                           


 





Making your Amazon purchases
through this Search Box helps
support oftwominds.com
at no cost to you:


Add oftwominds.com to your reader:




Music/Songs:

My Big Island Girl
Thrill the players to bits:
buy it via CD Baby or
amazon.com (99 cents)

Instrumentals by my friend
and mentor Coconut Charlie:

Crash Course
Secret Asian Man
Third Stone
Tonic Float

Survival+   blog  fiction/novels   articles  my hidden history   books/films   what's for dinner   home   email me