Monday, August 30, 2010

What a Difference 5 Years Can Make

Time Magazine cover stories are marvelous contrary indicators.

Time Magazine cover from June 13, 2005.
Time Magazine cover from September 6, 2010.

7 comments:

Chad_MPNP said...

Two sides to that coin. All you've seen recently in the Canadian media regarding our housing market are covers of a bubble, forecasts for a soft 2011, sales slowing... is the media a contrary indicator again here?

takloo said...

nice find!

jesse said...

I think data would show the media to be a contrary indicator around 50% of the time.

david said...

How is it possible that buying a home in the US now doesnt make economic sense? In many areas recently built houses are selling for less than it would cost to build a new one. So the land is essentially free and the house is being sold for what is cost to build minus a bit for depreciation.

Fear and greed, and the US is so far into the fear stage that they dont realise that now is a good time to buy in many areas if you have a steady job, or better than that, 2 steady jobs in your household. With a reasonable income you could buy a house now and have it paid off in 10 years, something basically unheard of in Canada right now.

jesse said...

"How is it possible that buying a home in the US now doesnt make economic sense?"

It depends where you are in the US. In the places you cite there is likely risk that the neighbourhood becomes blighted. In some areas I'm familiar with, while prices are certainly lower than a few years ago, they are far from cheap, based on what they rent for.

patriotz said...

How is it possible that buying a home in the US now doesnt make economic sense?

Because prices are still too high. Case-Shiller 20 is at about 2002 levels. This is well above the previous trough in the late 90's.

In most US markets, price/rent and price/income are still significantly above historical norms. They will inevitably return to them, if not go lower. And remember the outlook for household incomes, on which rents and prices ultimately rest, going forward looks bad by itself.

The US only looks cheap compared to itself in 2005 or Canada today.

If the USG got the hell out of supporting the RE market, prices would return to sensible levels in short order. As they would in Canada.

reasonfirst said...

G&M just picked up on this:

http://www.theglobeandmail.com/globe-investor/markets/markets-blog/magazine-covers-stir-contrarians-again/article1708375/