Housing market is one of fundamental factors driving the credit crunch and US economy. To get a pulse of its tipping point will help us time the market.
Greenspan pointed out that US housing market will bottom out in the first half of 2009. Two pillars of his proposition are supply of housing inventory and price-rent equilibrium.
He insisted that the price-rent is dislocated and will revert back to an equilibrum when market bottom out. As indicated by the chart, US Home Price-Rent (PE) ratio, has been hovering around 0.5 since 1987 until 2002. Since correction has started since the begnining of 2006 when hte PE level peaked at 0.9 and has slide below 0.7. According to this pace, it will revert back to 0.6 by the end of this year and pass 0.5 by the first half of next year.
No comments:
Post a Comment