Using the same graphs in the ‘Upturn’ post, one can see in the last downturn that:
Sales troughed in February 1995 (960), 9 months before prices troughed in December 1995 ($162,500).
NODs peaked in March 1993 (1,313), 2 years and 9 months before prices troughed in December 1995.
Summary: prices are sticky on the way down, taking 2-3 years from peak sales to peak pricing. It takes 2-3 years of falling sales before we see falling prices.
On the way up, prices move up more quickly in response to sales: it only takes 1 year of increasing sales to result in increasing prices.
Trough and peak NODs give 2-3 years notice of peak and trough prices, respectively.
Moral of the story, as we look for prices to trough: track NODs and sales. When NODs peak, prices will trough 2-3 years later. When sales trough, prices will trough 1 year later.
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