USA Residential Real Estate Market Looks Like Its About To Drop Hard!

Cpappa27

Cpappa27

Well-Known Member
I was doing some charting this morning and thought I would share this chart I made with you guys. In the chart as you can see the Real Residential Property Prices in the USA topped out in January of 2022 and have been on a decline since. Ive noticed houses I was looking at just a year ago, the prices are cut by 50% or more in some cases. Now what will cause this sort of drop in home prices one can speculate, and I have my own theories on that but regardless it looks like houses are about to get real cheap in the coming years.

How far it will correct is unknown at this point, but as you can see the last significant drop was from 2006 to 2011 almost 40%. This correction may go all the way down to the trend line before another massive spike in home prices in 5 years or so. RSI (Relative Strength Index) was overbought and had peaked back in January 2022, then broke the moving average to the downside and has a long way to go before reaching oversold again for the reversal back to the upside. Also the MACD (Moving Average Convergence Divergence) has a fresh curl and is pointed straight down about to break its moving average which is very bearish. Stochastic RSI is also straight down. All indicators are pointing to a massive correction that has already started. Also there is major bearish divergence between the chart price movement and the RSI + Momentum from the 2006 high to the 2022 high. When theres bearish divergence that strong the drop is imminent. As you can see the last bearish divergence was back in 1979-1989 tops. That bearish divergence was on the MACD, and it wasn't very strong but strong enough for a 15% dip to the trend line.

There is one thing that makes me think that there is a slight chance that the housing prices could go back up for an even higher high before the correction is the RSI. If you notice the RSI has been following this broadening wedge or megaphone structure. Its possible that the price could make one more move up in a blowoff top before a massive swift correction. I dont think this is likely but it is a possibility. All of this is just my opinion and not financial advice. Good luck out there, lots of money to be made in the next 10 years.

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fraggled

fraggled

Active Member
Nice charts. I am patiently waiting for the bottom of the next housing market swing to buy. Things are looking promising
 
Cpappa27

Cpappa27

Well-Known Member
fraggled said:
Nice charts. I am patiently waiting for the bottom of the next housing market swing to buy. Things are looking promising
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Thank you. I am also patiently waiting on the sidelines for some super cheap opportunities. Some big lows are in as well in many stocks and cryptos, could be a good time to dollar cost average in. Catching falling knives is dangerous and calling absolute bottoms is tough but I have a good idea how this will play out. I think we are about to go on a parabolic rally in the stock market and crypto market (crypto market not so much as a whole buit certain cryptocurrencies that are not considered securities by the SEC and CFTC and have a use case).

Bankruptcy filing has reached a massive high as well. Levels very similar to 2008 and late 2020. As you can see each top marked the bottoms in the stock market and a parabolic rally followed. When I compared the S&P500 and the bankruptcy filings to the residential real estate prices to try and find a predictable pattern , it wasn't very clear and direct so I still think the market will rally but the residential real estate market will continue to fall. I think because of all the bankruptcies and foreclosures there will be a flood of cheap homes on the market as well as many other factors. Also now that student debt forgiveness is over and they have to start paying, that will really impact a lot of people who have student debt and anyone who bought a home during that time and have student debt will have a hard time keeping up with the payments.

Check out the correlation between bankruptcy filings and the S&P it marked the bottom every time. I say we're about to have a parabolic rally

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Cpappa27

Cpappa27

Well-Known Member
thumper60 said:
Prices are still rising here 15-20% per yr theres a huge housing shortage across New England. Sales are lagging because of interest rates.
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I only see that in specific areas but as a whole its starting its correction. Some specific areas such as areas in the Northeast will experience the decline a little later than the less popular areas but it will happen in my opinion. Housing prices in Maine are dropping dramatically. I haven't looked at NH, MA or VT or others yet but by looking at All-Transactions House Price Index for New England states it still shows that its going up at the last tick which was at the end of Q2 so its lagging because the difference in home prices since May is high. In the last month or two theres been a flood of cheap homes and foreclosures. I see it, I look at Zillow almost daily and can see the flood. I currently have some lowball offers on 4 homes in 3 states, kinda like putting buy orders at where you think the bottom will be. As buffet said, buy when theres blood in the streets.
 
Cpappa27

Cpappa27

Well-Known Member
PappyVanWinkle said:
Makes sense as interest rates have risen the most and the fastest in the past 50 years.
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I think a pivot is coming, they wont raise again after this I dont think. DXY is at resistance. If it cant break resistance its going to tank, which is what I think will happen. It may have one more quick push up or a double top but I think 114 was the high. Likely scenario is it fails to break resistance drop back down to support at 99.5 and then freefalls from there for a lower low, lower than 2008. I think hyperinflation will be the cause for this. We already have some inflation now but nothing like whats about to come. Multiply everything by 5 thats going to be about the cost of things in the not too distant future. The reason for hyperinflation will most likely be the flood of American dollars back to America as the world continues dedollarizing and the coming bond collapse as well as the multiple trillions printed for the pandemic.

So the market will go up not because of any increased inherent value but because of hyperinflation. Holding dollars during this time will be detrimental. It doesn't take long for hyperinflation to hit. Some countries experienced it overnight. Once this happens everyone holding dollars, bonds, pensions, 401k, in all western countries tied to the dollar are going to take a 1/5th haircut on the value. They will still have the pension and 401k etc but it will only buy them 1/5th of what it would have bought them before while at the same time the cost of living is going up exponentially. This is why I say that there will be a flood of homes on the market. Most older folks and retired live off their retirement which they saved in dollars, 401k, pensions etc and are going to have a tough time keeping up with inflation and will be forced to sell their homes. Also there has been a drastic increase in number of deaths since the covid stuff that have happened and are still happening at high rates for various reasons, and those homes are also getting put on the market.

All this stuff sucks and its unfortunate but this is when the most money is made in markets and wealth transfers happen.

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Cpappa27

Cpappa27

Well-Known Member
Phytoplankton said:
In urban Cali, if the prices hold steady, it's a correction.
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I think the California real estate market price drop will lag compared to the rest of the country.
The chart looks like its double topping after a massive run. Its going to go back to the mean price trend line again. I think this chart below is an accurate description of what is to come for home prices in California and everywhere else for that matter. Cali is double topping so it will remain high for a bit but a massive almost 50% perhaps more when panic sets in and people sell the bottom.


CA-Home-Prices-Jun-2023.png
 
420 Garden

420 Garden

Well-Known Member
Here in Ohio housing is still way up compared to sametime last year. A shit ton of people are in way too deep on credit. Along with home values being so high people are starting to see that their property tax going up as well. If the employment sector tanks you will see people walking away from homes as happened back in 2008.
 
Cpappa27

Cpappa27

Well-Known Member
420 Garden said:
Here in Ohio housing is still way up compared to sametime last year. A shit ton of people are in way too deep on credit. Along with home values being so high people are starting to see that their property tax going up as well. If the employment sector tanks you will see people walking away from homes as happened back in 2008.
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I agree. So I see the decline in the housing market already but in places that historically have been the cheapest states in the country to buy property. So when those states start their decline that is my indicator that the rest are soon to follow. Like for instance Kansas has always kinda been cheap real estate for many many years one of the cheapest in the USA, similar with Oklahoma. The market in these states now has already started its decline. Many homes are down 50% from their high at the peak already in Kansas. When this happens the rest are soon to follow across the USA.
 
maklaus

maklaus

Member
Cpappa27 said:
I was doing some charting this morning and thought I would share this chart I made with you guys. In the chart as you can see the Real Residential Property Prices in the USA topped out in January of 2022 and have been on a decline since. Ive noticed houses I was looking at just a year ago, the prices are cut by 50% or more in some cases. Now what will cause this sort of drop in home prices one can speculate, and I have my own theories on that but regardless it looks like houses are about to get real cheap in the coming years.

How far it will correct is unknown at this point, but as you can see the last significant drop was from 2006 to 2011 almost 40%. This correction may go all the way down to the trend line before another massive spike in home prices in 5 years or so. RSI (Relative Strength Index) was overbought and had peaked back in January 2022, then broke the moving average to the downside and has a long way to go before reaching oversold again for the reversal back to the upside. Also the MACD (Moving Average Convergence Divergence) has a fresh curl and is pointed straight down about to break its moving average which is very bearish. Stochastic RSI is also straight down. All indicators are pointing to a massive correction that has already started. Also there is major bearish divergence between the chart price movement and the RSI + Momentum from the 2006 high to the 2022 high. When theres bearish divergence that strong the drop is imminent. As you can see the last bearish divergence was back in 1979-1989 tops. That bearish divergence was on the MACD, and it wasn't very strong but strong enough for a 15% dip to the trend line.

There is one thing that makes me think that there is a slight chance that the housing prices could go back up for an even higher high before the correction is the RSI. If you notice the RSI has been following this broadening wedge or megaphone structure. Its possible that the price could make one more move up in a blowoff top before a massive swift correction. I dont think this is likely but it is a possibility. All of this is just my opinion and not financial advice. Good luck out there, lots of money to be made in the next 10 years.
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I agree with your analysis of the US housing market. It seems that the real residential property prices have reached a peak in January 2022 and are now in a downtrend. According to, the prices have fallen by 0.6% in October 2023 compared to the previous year. This is a sign of a weakening demand and a possible oversupply of houses. I think the main factors that caused this drop are the high inflation, the rising interest rates, and the uncertainty caused by the pandemic. I also think that the prices will continue to fall until they reach the long-term trend line, which could be around 100 on the index. I don’t see any reason for a reversal in the near future, unless there is a major stimulus from the government or a breakthrough in the health situation. I’m not buying any houses right now, but I’m keeping an eye on the market for opportunities in the next few years. This is just my opinion and not financial advice.
 
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Stiickygreen

Stiickygreen

Well-Known Member
It's always up and down...like stocks...but the constant climb and recovery to a new, higher level makes it a good investment.

Some of us older won't be selling our houses. Why? Because we are debt free (across the board, no CC debt. Car loans, etc) they are paid off and we are just riding the ride. We might buy a house or two though if the prices drop again. Had 4 houses 10 years ago but sold/realized the gains and are down to the primary residence now. Good luck to anyone trying to set down root. Renting is gonna get even more expensive in the next 10....yikes.
 
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