- This topic has 21 replies, 9 voices, and was last updated 17 years, 8 months ago by
Chris Johnston.
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August 16, 2006 at 2:38 PM #7213August 16, 2006 at 3:04 PM #32054
anxvariety
ParticipantDot com overcorrection by fed?
August 16, 2006 at 3:50 PM #32061no_such_reality
ParticipantCheap money.
That’s what caused the bubble. I remember watching the home sales median month after month of new highs. The OC register had another small chart showing the previous year of “median” house payment. Homes were jumping $100K in a year, but the house payment was moving $100.
August 16, 2006 at 4:06 PM #32064an
ParticipantLike my comment on the other thread, I truly believe the FED dropping rates from high single digit to 1% that cause this major spike (RE bubble). Their intention was to save the stock market and the side effect was RE bubble.
August 16, 2006 at 5:15 PM #32077powayseller
ParticipantThe bubble started in 1999, 2 years before the Fed dropped rates.
August 16, 2006 at 5:18 PM #32078ParticipantThe bubble started in 1999, 2 years before the Fed dropped rates.
Me thinks dot com stock options and salarys had something to do with this….
Maybe it was Qualcomm?? 🙂
August 16, 2006 at 5:37 PM #32081Chris Johnston
ParticipantChris Johnston
iamafuturestrader.comI have a slightly different view on this. As alot of folks know here by now, I study cycles a great deal. I sold my house in 2005 in the fall due to my cyclical analysis telling me that the 10 year cycle was due. So, in my mind the correction is starting right on schedule.
What studying cycles in time does, is take the parabolic price moves out of the evaluation. Regardless of how far the stock market fell during it’s correction, it did make a cycle low almost to the week when it bottomed. Alot of people tried to fade it on the way down due to absolute price judgements, and were early and got strampled.
RE in 2003 was very extended price wise, but not time wise. The same logic was used by alot of people calling an end to the run just based on price alone. They were also early. I have to admit that I also thought at that time the price extension could not last, but once I began studying the historical cycles I thought it would go itleast until 2005, and it did here in OC, SD is about 6 months ahead of us.
In summary, I think you need a confluence of price and time to identify cycles in asset classes. I require both in my trading and on average it works well.
I am sure I will be pummelled in here for this post, but my actions matched my words and this was my logic behind the decision. In my mind we have a critical time point now with dropping long term rates. Will it save the day and keep this afloat? I say no for the same reason, cycles in time and price say otherwise. Swing away I have a good chin!
August 16, 2006 at 6:10 PM #32085ParticipantChris, the cycles you describe are very interesting, and something I had not considered before. Do you have any links so I can read more about it? It just goes to show there is order in the universe, and like a pendulum, behavior and markets slowly swing from one end to the next, back and forth, back and forth. I didn’t realize there was any order in the markets (hahaha); it seemed chaotic to me. What a comforting thought – to have cycles in the markets, as in nature. I want more info on this, for sure.
August 16, 2006 at 6:24 PM #32087tickets
Participantcredit scoring. mortgage credit scoring models were developed in the 1980’s but only went into widespread use in the mid 1990’s. They reduced the adverse selection problem and allowed institutions to make money with looser underwriting standards. The credit expansion started the ball rolling. Low interet rates added plenty of fuel to that fire.
August 16, 2006 at 8:14 PM #32095PD
ParticipantHousing runs on cycles. This cycle was unusual in the height of the spike (the last few years), which was caused by low interest rates and looser lending.
August 16, 2006 at 11:22 PM #32110SD Realtor
ParticipantChris interesting post. So are you contending that the cycles are fixed in time? Regardless of whether it is real estate or the stock market, that all efficient markets have temporal cycles that are somewhat independent of underlying fundamentals?
August 17, 2006 at 7:36 AM #32134ParticipantChris Johnston
iamafuturestrader.comSD – no that is not what I am saying. What I am saying is that you cannot determine cycles by price alone. Momentum moves that detach themselves from fundamentals can run so much further in price that what we can ever project. I would argue that these price extensions are actually part of the fundamentals. They happen often, Gold at $725 just a bit ago is another example. When this is happening, coupling time cyclical analysis can help us make a better estimate of when the cycle is due to end.
This cycle has ended right on schedule time wise in RE although late in price, and it is how I determined to wait until 2005. Predicting price with price alone is something alot of traders try to do, and why many of them get blown out. I learned this lesson through the school of hard knocks, believe me! The ten year cycle has repeated itself fairly close to on schedule a few times in RE.
The stock market low of 2002 went really far in raw price dollars, but not in time. Combining the two in that case also worked very well. The fundamentals actually are what create the cycles in the first place. Supply and demand are what determine the major price turns. Demand was certainly extended by the financing aspect of all of this. However, my argument is that in my world of KISS (Keep it simple stupid) I did not need to over analyze 100 different variables. I just focused on two and basically got it right.
My question is which is easier, analyzing a wide array of very fluid numbers and trying to come up with an overall bias, or just looking at larger picture cyclical things and not sweating the small stuff? For me I take the latter approach.
My little pea brain loves to go off on tangents and over analyze things, so I have learned to keep it focused. I know this is probably controversial but I do tend to think a little different from the crowd. At times though it does make me the village idiot!
August 17, 2006 at 7:41 AM #32135ParticipantChris Johnston
iamafuturestrader.comPW – there is plenty of chaos, but there is some order that can be dialed in. I do not know of reading material on re cycles because I determined that from my own research. However, I do have developer friends that have also mentioned it so there must be something written somewhere about it. Seasonal effects on commodity prices have been a fairly regular occurence that repeat. In fact there is actually seasonality to certain days of the year in many markets.
Some of my cyclical analysis calls for late 2008 to be a buy spot for RE.
August 17, 2006 at 11:00 PM #32275ParticipantChris I “think” I see what you are saying. I do understand your point that momentum may push pricing (be it equities or real estate) past the norms of the expected highs or lows for the cycles. Can momentum then extend or shorten the temporal aspect as well? Should I assume that you project late 2008 as a buying opportunity because the downward momentum will push this re cycle lower faster? Or do you believe that 2008 will be the beginning of the bottom that will last a year or two before it turns back up. I am assuming a “normal” time of 4 years for a re cycle to go from peak to peak on the downside. Is that your estimation? Or have I oversimplified?
On a seperate point, although there are daunting signs, I believe there will be a fall rally for a variety of reasons. However, in my novice opinion, I think it may occur and end, a little earlier then past fall rallies. I am wondering your thoughts on that. Also historically August and September are very poor months for equities, do you feel that pattern will occur this fall?
August 17, 2006 at 11:07 PM #32278JES
ParticipantLittle off topic, but don’t want to start a new thread:
More proof that the masses are not on board yet. Granted, it is a nationwide audience, but I would think that the nationwide sentiment right now would be not to buy. Unless of course the ‘red’ states are saying yes and ‘blue’ states like CA and NY where prices have soared are all saying no!
From a current CNN Business online poll:
Question:
With the recent stall in home price growth, do you think this is a good time to be looking to buy a home?Yes 47%
No 44%
Not sure 9%
total responses to this question: 19,427 (and growing) -
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