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U.S. Housing: Look at This 50% Retracement

"Housing booms tend to be relatively relentless affairs"

by Bob Stokes
Updated: May 14, 2019

We've all heard that the three most important considerations in real estate are location, location and location.

But, how about --- timing?

In other words: Imagine you found that perfect location, but didn't realize that the housing market was ripe for a reversal at the very time you were ready to move?

Of course, the challenge here is that no one knows the future.

However, just like with other financial markets, Elliott wave analysis and other indicators can be highly useful with real estate.

Here's an example from our March 2005 Elliott Wave Financial Forecast:

FirstBreakLower

The five-wave pattern from 1990 says that the January drop in home sales is the beginning of a much steeper long-term decline.

First, a quick reminder that most housing market observers at the time -- not to mention, real estate buyers and sellers -- were still highly bullish on the sector. "Last I heard, they weren't making any more land," was a common snickering response to a real estate skeptic then.

Even so, homebuilding stocks topped a few months later in 2005, and home prices peaked in 2006. You remember what happened next.

Fast forward to the May 2019 Elliott Wave Financial Forecast. Here's a chart and commentary:

HousingBuildingPermits

As the chart shows, housing booms tend to be relatively relentless affairs, with steady vertical ascents. The prior boom in housing building permits lasted 176 months, and was much longer than prior booms. That's why in the mid-2000s, it was commonly stated that house prices only go up. This belief was disproven by the bust, shown as a steep collapse on the chart. The rise in building permits to the high in March 2018 lasted 108 months from the prior trough, so it was long in the tooth by historical standards.

You'll notice that there's been a 50% upward retracement of the prior decline.

What does this mean?

Our May Elliott Wave Financial Forecast provides analysis -- and also shows subscribers three more real estate charts which are highly instructive.

Join in -- and prepare now for what our analysts see ahead.

The Jump in Stock Market Volatility Makes EWI's

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