This does not look like a bottom in median existing home prices
Back in October 2022, none other than Realtor.com asked the question:
Is America in a housing bubble–and is it getting ready to burst?
That was 10 months ago and just like a widely anticipated recession, the feared bursting of the housing bubble has yet to materialize.
Indeed, another real estate sector firm — Zillow — has gone out on a limb with this prediction (Fortune, July 28):
In February, Zillow economists made a bold call that U.S. home prices had bottomed…
In the months that have followed, U.S. home prices as tracked by the Zillow Home Value Index have stopped falling, and between February and June rose 4.8%.
Yes, Zillow’s forecast has mainly worked out so far, however, let’s also keep in mind seasonal and other factors.
Here’s a perspective from our July Elliott Wave Financial Forecast, which used another measure to gauge the health of the U.S. housing market:
This chart showing the year-over-year change in the median existing home price doesn’t look much like a bottom. According to the National Association of Realtors, the median existing home sold for $396,100 in May 2023, a 3.1% decline from May 2022, “marking the largest year-over-year price reductions since December 2011.” Recent increases can be attributed to two factors: spring buying, which happens every year, and the run-up in equity prices, which makes people feel wealthier.
So, we’ll see what happens after the seasonal bias passes. And, just as importantly (or more so), we’ll have to keep an eye on the stock market.
History shows that the housing and stock markets tend to be correlated.
So, if the stock market tanks in a big way, we could have a replay of 2007-2012 on our hands.
Of course, that’s a big “if.”
One way to gauge the health of the stock market, and thus the housing market, is to keep an eye on the stock market’s unfolding Elliott wave pattern.
At this juncture, it is nothing short of attention grabbing.
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