Step 1: Identify powerful leading indicators - Deepstash
Upskilling: Preparing For The Future

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Step 1: Identify powerful leading indicators

Step 1: Identify powerful leading indicators

The big three; building permits, housing starts, and new homes sales are the most reliable for predicting housing market health in the U.S. released once every month respectively, the data associated with the indicators can be freely downloaded from the Internet. 

Once housing-related indicators start to trend one way over an extended period, house prices stall and then reverse in the opposite direction. Once housing-related indicators start to trend one way over an extended period, house prices stall and then reverse in the opposite direction.

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Step 3: Assessing the market’s liquidity

Interest rates and credit spreads play a considerable role in the availability of credit to build houses. 

Most consumers and businesses don’t just buy a plot of land upfront with capital; mainly because the average joe doesn’t have $500,000 in cash to blow on real estate. 

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Step 4: Analyse housing-related commodity prices

An indicator lagging all others is the commodity price of lumber. When the price of lumber crashes — like in July 2018 — it usual coincides with a peak in house prices. This makes sense: if there’s a decrease in construction demand, prices have to fall to counteract the excess su...

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Step 2: Use the stock market as an indicator

What we’ve learned is the stock market can predict a housing crisis long before the crash occurs. It’s also important to remember that real estate and housing stocks follow the leading indicators we’ve utilized and not the stock market as a whole because the former is the most ac...

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Step 5: Predicting the future housing market

When analyzing the information gathered over the preceding steps we can come to the following conclusion: looking at the fundamentals, it’s pretty apparent there’s pain ahead for the housing market. 

Prices are starting to peak, and we are witnessing a slowdown in growth similar to December...

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Step 6: Speculate without owning physical assets

Real estate investment trusts are required by law to pay back 90% of their profits to shareholders. Therefore, REITs have some of the highest dividend payouts in the stock market ranging for 3–12%. If house prices don’t appreciate you still receive the annual dividend interest.

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