U.S. Housing: Unfolding Bull Market

After several requests, and a few opinions, we took a look at the Housing sector to see how our bull market was unfolding.


Our leading indicators, Building Permits and Home Builder Sentiment, are still rising off their expected 2009-2011 double bottom lows. In fact, building permits have nearly doubled from the 2009 lows reaching their highest levels in five years.

Home builder sentiment has risen from a low of 8% in 2009 to well into the 40′s% in recent months. Recently reaching its highest level in nearly eight years. We are not expecting a downturn in housing prices, which is next, until six to twelve months after both of these indicators have turned down.

After a peak at New home prices in 2007, they declined about 25% into an early 2009 – late 2011 double bottom low. Since that low, they have not only risen, but were just reported exceeding the highest price of the 2007 peak. New home prices have risen over 28% in less than two years.

Fueling this rise has not only been about historically low mortgage rates, thanks to the FED’s Operation Twist and Mortgage Backed Securities buying programs. A somewhat muted economic recovery and the increase in affordability doesn’t just translate to lower rates and more jobs – it also means a substantial decline in relative household debt, which is currently at its lowest level in more than 30 years.

Existing home prices, as measured by Case-Shiller, have risen 9.5% nationwide since their early 2012 low. Keep in mind thta this lagging indicator is inflation adjusted using the CPI, and has a two month lag in data reporting. Their latest reporting period was for February, so the actual price increases have probably been 2% to 3% higher. Nevertheless, we have been expecting a 15% to 25% increase in this index, from the lows before the current bull market in housing ends. It has at least another year, and probably more to go. Happy house hunting.