Tuesday, August 31, 2010

Housing (Greed - Fear - Bottom) Cycle

Irvine Housing Blog (hat tip The Big Picture) shows the below chart and details that:

It is a sign that people are clinging to the hope of a real estate recovery. We are not yet at the bottom.

While I understand the above chart is meant to make a high level point (rather than show exactly where we are), I thought it would be interesting to overlay the Case Shiller home price index on top.

We are not as early in the process as the chart would indicate (i.e. we've already fallen much further), it appears we still have plenty of risk remaining to the downside.

Another way to view this is Case Shiller 10 vs. inflation (CPI) over this time.

Closer, but still about 20% "too high" and during "despair", it tends to break through.

Source: S&P / BLS


  1. I think in some areas things may have bottomed, but I still see way to many sellers listing at 2005 prices around me to think a bottom is in everywhere.

  2. true... the chart i used is just the shiller 10

  3. The counterpoint is that the highs are usually reached when everyone is convinced there is no limit to how high an asset class will go and the lows when everyone is sure that we're not anywhere near the bottom.

    I'm not being a housing bull, just suggesting that the herd is often behind the curve.

    That aside, a great set of charts.