By Elliott Wave International
Editor’s note: You’ll find a text version of this story below the video.
During the subprime mortgage meltdown, the hardest-hit regions saw home price declines that exceeded 50%.
Fast forward to the headlines today:
- Vancouver’s detached home prices at record high as demand soars (Globe and Mail, July 3)
- Hong Kong’s first-half home sales, prices at record high as Chinese buyers pile back in (Reuters, July 2)
- Manhattan real estate prices hit record (CNBC, July 1)
- House prices hit a record high in Greater Toronto Area (Toronto Star, June 26)
- House prices [in England and Wales]: Average asking price soars to record (The Independent, June 15)
- Silicon Valley home prices hit record highs, again (San Jose Mercury News, May 21)
The list could go on.
The just-published July Elliott Wave Financial Forecast calls attention to the Australian housing market.
[Australian] household debt as a percentage of income stretched to 155% in the first quarter of 2015, its highest level ever.
Economists Lindsay David and Philip Soos forecast an eventual crash:
“A bloodbath in the [Australian] housing market appears a near certainty… .”
In the U.S., the median price of homes sold in May was $228,700. That’s just shy of the median home price of $230,400 registered in July 2006 at the top of the previous housing boom.
Even so, the chief economist for the National Association of Realtors recently made this claim on CNBC:
“This is clearly not a bubble.”
We beg to differ.
The June Elliott Wave Theorist published this chart [wave labels available to subscribers] and commentary:
Homebuilding stocks are a leading indicator of house prices, and square footage is a lagging indicator. As shown in [the chart], the S&P index of homebuilding stocks topped in 2005; home prices topped in 2006; and the average square footage of newly built houses peaked in 2008. This progression should repeat in the current cycle… .
The only graph on this chart making a new high today is the average square footage of a house. Fewer people are buying new homes, but those who are in the market are building mansions. This is like a [countertrend] top in the stock market in which only blue chips are making new highs. It will surely end with a … collapse in all three of these graphs.
We think this is just the tip of the iceberg.
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In part one of this three-part report, you’ll see eight unprecedented extremes (with supporting charts) that indicate a stock market bubble.
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This article was syndicated by Elliott Wave International and was originally published under the headline (Video, 3:07 min.) Housing Market: Is the Roof About to Cave In (Again)?. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.