Housing enters a bubble by one measure

On it's own the NAR's Housing Affordability Index is pretty useless - it hasn't dropped below the 100 level signaling unaffordability since Bill Clinton was president. But researchers from Robert Morris University suggest the index can detect a housing bubble if it slips below its long-term trend line for at least three months.

And that's just what it's done of late, falling below the long-term trend in April and staying there through July (July figures were reported yesterday). This doesn't mean prices are set to crash - by RMU's read, housing went into a bubble in 2004, but prices didn't peak until two years later - but the data might be another push to a Fed considering tighter monetary policy.

Homebuilders ETFs: XHB, ITB, PKB, REZ.

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Comments (3)
  • bbro
    , contributor
    Comments (11227) | Send Message
    Housing Affordability Index averaged 125 in the 1990's with a low of 102 and a high of 140....current reading 157
    10 Sep 2013, 10:35 AM Reply Like
  • bbro
    , contributor
    Comments (11227) | Send Message
    Robert Morris study is skewed...


    The basis of the trend line is...


    "determine the trend line, using a polynomial equation, for AI values in the most recent 20 years"....
    10 Sep 2013, 10:48 AM Reply Like
  • petten
    , contributor
    Comments (121) | Send Message
    Old sport, what do you suggest?


    Continue buying and wait for two years to sell when it peaks ;-?
    11 Sep 2013, 06:53 PM Reply Like
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