A new housing bubble is clearly visible when the real home price takes into account the effects of inflation and therefore allows for better comparison over time.
The ratio in the chart below divides the Case-Shiller Home Price Index by the Consumer Price Index (CPI). The Case-Shiller Home Price Index seeks to measure the price of all existing single-family housing stock.
When inflation is high, prices as measured by the CPI increase, and the purchasing power per unit of currency decreases. The Case-Shiller index has a base of Jan 2000=100 while the CPI has a base of 1983=100. Therefore, it is the trend over time that is significant and not the absolute ratio values.
As you can clearly see in the chart, when the ratio gets near .6 a new housing bubble is achieved and real estate prices head down. The higher the ratio, the faster prices they head down.
Just look at the prices and how they have risen…
The charts above and the one below are clearly telling you that a new housing bubble is closing in on us now and is ready to pop.
Do you remember what hit in 2008, because this one will be much larger with sustained reach?
The Case Shiller Index is now 160% higher than in January of 2008. And as history showed us, since 1890, a decline of biblical proportions is coming.
When you add the New Housing Bubble to the Money Supply Chart, to the Market Cap to GDP chart, to the Dividend Yield Ratio, to the Market Cap to GDP Ratio, to the Screaming S&P500 Dividend Yield, and to the current S&P500 P/E Ratio, you better be prepared for a long-term sustained deep economic crash. This will be a stock market and real estate crash will dwarf 2008.
No one can afford to live through a 7 to 15-year depression, so please prepare now because the warning signs are now clear.
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