FURTHER CONFIRMATION THE PRICE OF THE AVERAGE AMERICAN HOME HAS PEAKED
by Bob Bronson, Bronson Capital Markets Research. October 28, 2004
While the important "leading" median new home sales price index peaked in April, the "lagging" median existing home sales price index peaked in June, so that our composite of them, weighted by their sales volume, also peaked in June.
Not surprisingly, this price peak for the average American home (property) is a Kitchin-cycle four years after the all-time peak for the highest-priced properties, mansions and estates, which followed the all-time stock market peak in March 2000.
This secondary peak in the stock-market-lagging composite price index for the average American home is consistent with our call for The Great American Home-Equity Bust, with our reasoning more fully explained earlier this year, as well as with the second, or C, downleg in an ABC-zigzag pattern in the Supercycle stock bear market, as explained in my March 3rd editorial.
Contrary to others who agree there is an American housing bubble in prices and mortgage debt, we have never expected rising mortgage interest will cause, or even trigger, the price peak resulting from a combination of over supply that we've expected from typical trend-following over-building following a natural peak in demand resulting from "over ownership." We believe both bearish price conditions have now occurred.
We expect the resulting multi-year house price decline, even if gradual and in sharp contrast to stock market price declines, will create a cause-and-effect negative wealth feedback. This vicious cycle, or downward spiral, with consumer spending will exacerbate the incipient business cycle slowdown into a severe recession, which we continue to expect to start next year, as we also reasoned and explained previously:
09/22/2004 Yes, of course, owning a home is a good family and financial investment, but...
08/08/2004 Globally Synchronized Recession Coming
© 2004 Bob Bronson
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Bob Bronson | Bronson Capital Markets Research | Email
