Housing vs. S&P Revisited

[tsptalk]

Do you remember this housing vs. S&P 500 chart? It said the S&P lags the housing market by 12 months, and that we could see some downside in stocks...

Well, the S&P fell, but certainly not to the 600 level as this chart showed as a target. Perhaps it needs a logarithmic chart by percentage rather than points.

Anyway, here is a new housing chart going thru August 18, 2008. The NAHB housing index is the pink line...

 

[fabijo]

Here, I put the HMI data alongside the S&P data (lagged one year) into Excel. Here's where we're at:

I'm not sure if the correlation continued.

 

[tsptalk]

Cool! Thanks fab.

 

[Show-me]

Just a reminder the NAHB Housing Index is at 18.

http://www.nahb.org/generic.aspx?genericContentID=529

 

[James48843]

Man those are ugly charts.

Yep= that's the one I was looking for. Thanks.

I need a drink.

 

[James48843]

Bump.

This is where we are going.

 

[Mike]

If you look at the housing index back to its inception in 1985, the "correlation" between it and the S&P + whatever lag you wish to apply disappears. The S&P climbed for the most part, regardless of what this index did between 1985-1995. Here is the link: http://images.google.com/imgres?img...+index+chart+2008&um=1&hl=en&safe=active&sa=N

Here's some interesting reading: http://www.investorsfriend.com/S and P 500 index valuation.htm - according to that analysis, the S&P 500 fair value could be anywhere from the 700s to where it is now, depending on earnings / PE assumptions.

 

[tsptalk]

Good find Mike.

 

[James48843]

Great find Mike.

I especially liked the second one.

It is the first appearance of "this is where we are supposed to be, and I told you so four years ago".

Which is another--ever so small- indicator of the bottoming out in my book.

 

[Mike]

Once in awhile I'm good for something.

 

[tsptalk]

Here, I put the HMI data alongside the S&P data (lagged one year) into Excel. Here's where we're at:

I'm not sure if the correlation continued.

fabijo -

The S&P has dropped about 500 points since your update. Do you have the ability to spit out an updated chart - without too much trouble?

Thanks!

 

[James48843]

Just a reminder the NAHB Housing Index is at 18.

http://www.nahb.org/generic.aspx?genericContentID=529

That NAHB index is now at 9.


9!

Ugly.

 

[tsptalk]

Updated through Feb 09...

 

[James48843]

oh THANKS-A-LOT for that picture.


Jeeezeee ooohh peetee. UGLY, isn't it?


Now I feel all better.

Well, I guess I end up working until age 74, and then die.

 

[XL-entLady]

Yeah, that was my reaction too. I've had nightmares better than that.

Lady

 

[weatherweenie]

I was just thinking about this chart the other day. Thanks for the update.

Updated through Feb 09...

 

[Birchtree]

Realistically I'm not concerned about the chart. Most of the mortgage defaults and foreclosures are do to the at risk population - they are not stock owners. Investors are now fighting over the purchase of these foreclosed homes and turning them into rentals for now with plans to sell them five years down the road when prices gain. The housing crisis is over. Single family home starts were actually up 2.8% in April I believe.

 

[Bullitt]

I always though the market was a discounting mechanism. I knew it, those sell side analysts lied to me again!

Conclusion: The Market is not so good after all in regards to predicting turns.

 

[tsptalk]

oh THANKS-A-LOT for that picture.

Jeeezeee ooohh peetee. UGLY, isn't it?

Now I feel all better.

Well, I guess I end up working until age 74, and then die.

Although the chart is purely conjecture at this point, it's not even the decline that is so bad. We can always sit on the sidelines and get the buying opportunity of a lifetime when we hit bottom (assuming it continues). But rather it is the duration of the decline. If the comparison does continue, we're looking at 15 to 24 more months before we see the lows in the S&P. :blink:

It's tough to make money when the market drops for 3 or 4 years (unless you are good at market timing). Many of you are in your 50's looking to retire soon (mainly talking to future FERS retirees), and this won't help. Timing may be your only chance.

 

[Bullitt]

I wonder if there's some indicator out there that will signal a bottom that we don't know of yet. For example, maybe someday when Social Security gets reformed, there's going to be some chart showing the distributions and it's correlation to the stock market.

While this chart is somewhat revealing, keep in mind it only goes back a little less than 15 years. How did it fare in the 70's and early 80's?