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August  2008

 

Worst over for housing in the United States?

Housing are still deep in red the United States and they might remain weak for some more time, but the worst could be over, if history would repeat itself.  In fact, the next  months are critical, since various level of support (cyclical and technical) are converging. Nonetheless, sell offs are still possible, followed a  period of consolidation, before house prices will be moving upward again. Let’s see why.

Since 1963, the long term uptrend of  house prices had  two major drawdown from highs to lows. They both lasted approximately two years.  The first,  from March 1969 until December 1970. The second, from January 1990 to January 1992. It then took about two years from the lows for prices to touch new highs again. The current decline, which started during the second half of  2006 is approaching the critical two year period.

In addition, the total of houses sold in the United States, which touched  the historical high at about 130 in 2006,  is reaching an important bottom at 25/35. From 1963, excluding the major bull market that began in 1991 and lasted fifteen years, important bottoms occurred about every eight years: 1967, 1975, 1983, 1991, 2000, 2008 (?). Tops were instead registered about every seven years: 1972, 1979, 1986, 1993, 2000, 2006, 2113(?).