Here’s data of median price from the last and current cycle. I’m not sure if you have this link or not, but here it is: http://www.housingbubblebust.com/92SoCalRecession.html. According to the data, the highest negative y-o-y decrease is around 1994. The rate of negative y-o-y median price start decreasing and it turn positive in last Q 1995 and 1st Q 1996. That’s 6 months of data in the + y-o-y after a 5 year – y-o-y, would you call that a good time to buy? after all, things are turning positive again. Well, if you say yes, the next year would be quite hard for you, it turn back down again and the house you would have bought probably doesn’t break even until 2 years later. That to me is a dead cat bounce.
Now, lets look at this up cycle. It’s not as obvious but if you keep too close of an eye on things, you might get trigger happy. Here’s one example. Using that same site you see that rate of appreciation increase every Q since 1996 until end of 2000. Around that time is when I remember first start reading about housing being over priced in SD from SD UT. Rate of appreciation start decreasing after 4th Q 2000 from 15% y-o-y to 4th Q of 2001 or 1st Q of 2002 @ 11%. I don’t know about you but seeing appreciation slow and fundamental is already out of whack and people talking about bubble, that might be a signal to sell, right? Well, we all know what happened after that. It would probably continue to go down from that point if Sept. 11 didn’t happen. But since it did and the Fed start slashing rates, that’s why we’re here today.
So there’s a possibility that the next time you see price start turning back up again and you think it’s safe to buy, there might be another economic shock that will drive it down further, such as major oil shortage or a war that will drive oil through the roof and cause inflation to go rampant, which will cause the fed to raise rates. Those and many factors that will affect the RE market although it has nothing to do w/ RE.
