U.S. House Prices Forecast 2014, 2013 Bull Market to Yield U.S. Economic Boom
01-06-2014
By: Nadeem_Walayat
U.S. central bank rampant money printing has succeeded in inflating the US housing market far beyond anything that anyone could have imagined at the start of 2013, in fact a year ago the consensus view was that for U.S. house prices to end DOWN on the year, and such prevailing bearishness persisted in the mainstream press well into the middle of the year, instead as of writing the latest house prices data of 180.27 (SPCS10) published on 31st Dec 2013 for October 2013 puts U.S. housing market momentum at a high of 13.5% per annum as illustrated by the graph below:
In my last U.S. housing market analysis of late November 2013, I mapped out a momentum trend trajectory of how I expected U.S. house prices to perform during 2014:
27 Nov 2013 - Raging U.S. Housing Bull Market, House Price Inflation Breaks Above 13%, 2014 Outlook
What are the Implications if Momentum Going into 2014?
I would not be surprised if current strong momentum is sustained into data for February 2014 to be released in April 2014. Therefore U.S. house prices could be rising at an annualised rate of more than 16% per annum! However, such momentum would NOT be sustainable and WOULD give way to a correction to an inflation rate of under 10% and I would not be surprised if it falls to 7% by July 2014 data to be released in September 2014.
The latest data for October 2013 confirms my view that the U.S. housing market is going to be experiencing a severe slowdown in momentum during 2014 as the inflation rate drops from about 15% early 2014 to probably under 7% towards its end. This is in the context of my over-riding 3 year forecast of Jan 2013 to early 2016 as U.S. house prices look set to converge towards the forecast trend trajectory during 2014.
By mid 2014 the sharp slowdown in price rises will prompt many commentators in the mainstream press to proclaim that the bull market has ended, when in reality it would just represent the market laying the ground work for the next leg higher during 2015 as prices oscillate around the forecast trend.
12 Jan 2013 - U.S. Housing Real Estate Market House Prices Trend Forecast 2013 to 2016)
US House Prices Forecast Conclusion - As you read this, the embryonic nominal bull market of 2012 is morphing into a real terms bull market of 2013, with each subsequent year expected to result in an accelerating multi-year trend that will likely see average prices rise by over 30% by early 2016, which translates into a precise house prices forecast based on the most recent Case-Shiller House Price Index (CSXR) of 158.8 (Oct 2012 - released 26th Dec 2012) targeting a rise to 207 by early 2016 (+30.4%).
The following updated graph illustrates the trend that has transpired following the actual buy trigger that took place that transformed the embryonic bull market of 2012 into a bull market proper as of October 2012 data published in late December 2013.
Excerpt: The graph shows that following the expected real terms downtrend forecast into early 2011, continued into the end of 2011 and that subsequently the embryonic bull market of 2012 has triggered a BUY SIGNAL ON the LAST Case Shiller data release (October 2012), that will likely be confirmed on the release of subsequent data over the coming months.
The key point the chart illustrates for today is that contrary to the end of the bull market mantra that people will tend to be liberally exposed to in the mainstream press, the reality is that the U.S. housing bull market is nowhere near triggering a SELL signal, at least not for the whole of 2014 which continues to support my 3 year bull market scenario into early 2016, as this indicator will continue to prove remarkably useful in warning of the next market turning by that point in time.
So whilst US house prices have been soaring during 2013, still prominent market commentators such as Peter Schiff could be seen literally warning of an imminent CRASH, as the US housing market literally galloped up a debt ceiling and government shutdown mountain of worry.
6/4/13 - Great Reflation Produces Mirage Of Recovery In Housing
By Peter Schiff - concluding -
Of course the real risks in housing center on the next leg down, in what I believe will be a continuation of the real estate crash. We can’t afford to artificially support the market indefinitely. When significantly higher interest rates eventually arrive, the fragile market will again be impacted. We saw that movie about five years ago. Do we really want to see it again?
U.S. Economic Boom of 2014
In my opinion the raging housing bull market of 2013 is merely phase 1 of an engineered feed back loop that will next manifest itself in strong U.S. economic growth during 2014 that is far beyond that which any academic analysts can perceive of today as they obsess over the likes of QE tapering, despite the fact that tapering STILL MEANS continuing money printing and somewhere along these academics seem to have forgotten all about what CHEAP fracking energy means for the U.S. economy. So whilst the foot may have been taken off the accelerator for U.S. house prices during 2014, the gas has already been amply applied towards uplifting the U.S. economy that will make itself manifest during 2014 and which will feed back into the U.S. housing market during 2015.
In terms of GDP this translates into typically adding 1.5% to 2% to the academic economic forecasts for 2014. For instance as of writing the IMF is forecasting that the U.S. economy will grow by 2.5% for 2014 whereas actual growth will likely turn out to be a far stronger at a rate of 4% to 4.25%.
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Summary for 2014 - Sharp slowdown in U.S. house prices inflation to under 7% coupled with sharp acceleration in U.S. economy to GDP 4% to 4.25%.
Your analyst warning you not to pay any attention to the bubble talking fools during 2014, all of whom never saw this bull market coming and thus will continue to remain in a permanent state of denial just as they have been towards the stocks stealth bull market of the past 6 years. Understand this - we won't see a bubble peak in U.S. house prices for many more years.
Source and Comments: www.marketoracle.co.uk Nadeem Walayat
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Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of four ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series.that can be downloaded for Free.
Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.
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