Realty Bites

Q: Does your home price hype cycle theory apply to the stock market?

A: We’ll find out next week.

There was, in fact, a headline on the front page of The New York Times on Sunday, October 12: Those with a Sense of History May Find It’s Time to Invest. To my way of thinking, this is the rough equivalent of The Worst is Over. As you know from my previous post, when The New York Times reports the worst is over, the worst is just beginning. It is entirely possible that the stock market continues to drop sharply next week.

Consider another unattributed article from the Times on the same day. This one was quite clever, comparing today’s news to actual quotes from 1929, just moments before the stock market crash. Here are some excerpts from the piece:

From a “Wall Street Analysis” by Thomas C. Shotwell in “The World Almanac for 1929”:

The market is following natural laws of economics and there is no reason why both prosperity and the market should not continue for years at this high level or even higher. MORE →

That was the lead headline that came across my desk today in National Realty News. Here’s an excerpt:

Data through February 2008, released by Standard & Poor’s for its Shiller Home Price Indices, the leading measure of U.S. home prices, show declines in the prices of existing single family homes across the United States worsened in the second month of the new year, with 17 of the 20 now reporting MSAs [Metropolitan Statistical Areas] posting record low annual declines, 10 of which are in double-digits. MORE →

Regardless of how high or low you think home prices are going, one thing is certain: prices will reverse direction. Wouldn’t it be nice if you could predict the top and bottom? Here’s a foolproof method. I call it “The Home Price Hype Cycle.” My thesis is that you can tell exactly where prices are headed by reading the headlines in The New York Times. (Oh, all right — substitute your favorite newspaper.) Don’t confuse this method with the hype cycle concept developed by Gartner Group, a great piece of work if you want to understand the marketing of innovation. MORE →