By Elliott Wave International
Editor’s note: You’ll find a text version of this story below the video.
During the subprime mortgage meltdown, the hardest-hit regions saw home price declines that exceeded 50%.
Fast forward to the headlines today:
- Vancouver’s detached home prices at record high as demand soars (Globe and Mail, July 3)
- Hong Kong’s first-half home sales, prices at record high as Chinese buyers pile back in (Reuters, July 2)
- Manhattan real estate prices hit record (CNBC, July 1)
- House prices hit a record high in Greater Toronto Area (Toronto Star, June 26)
- House prices [in England and Wales]: Average asking price soars to record (The Independent, June 15)
- Silicon Valley home prices hit record highs, again (San Jose Mercury News, May 21)
The list could go on.
The just-published July Elliott Wave Financial Forecast calls attention to the Australian housing market.
[Australian] household debt as a percentage of income stretched to 155% in the first quarter of 2015, its highest level ever.
Economists Lindsay David and Philip Soos forecast an eventual crash:
“A bloodbath in the [Australian] housing market appears a near certainty… .”
In the U.S., the median price of homes sold in May was $228,700. That’s just shy of the median home price of $230,400 registered in July 2006 at the top of the previous housing boom.
Even so, the chief economist for the National Association of Realtors recently made this claim on CNBC:
“This is clearly not a bubble.”
We beg to differ.
The June Elliott Wave Theorist published this chart [wave labels available to subscribers] and commentary:
Homebuilding stocks are a leading indicator of house prices, and square footage is a lagging indicator. As shown in [the chart], the S&P index of homebuilding stocks topped in 2005; home prices topped in 2006; and the average square footage of newly built houses peaked in 2008. This progression should repeat in the current cycle… .
The only graph on this chart making a new high today is the average square footage of a house. Fewer people are buying new homes, but those who are in the market are building mansions. This is like a [countertrend] top in the stock market in which only blue chips are making new highs. It will surely end with a … collapse in all three of these graphs.
We think this is just the tip of the iceberg.
If you want to see more signs of the forthcoming bubble, give this new free report a read: A Bubble in Trouble.
In part one of this three-part report, you’ll see eight unprecedented extremes (with supporting charts) that indicate a stock market bubble.
You’ll get instant-access to all three parts when you sign up to join Club EWI, the world’s largest Elliott wave community — and it’s free!