Chart of the Day is reminder of ongoing drop in core asset - home prices

It seems many markets may classify bearishly as completing, or already completed, a "b" wave up that positions them for lower levels. The housing and real estate markets look like they fit into this description. Below is my weekly chart of the real estate ETF, called IYR, showing that it's turned down after testing its 50% retracement to an interim 2008 swing high with the sharp rally. Slightly higher are $48.38 which would retrace 61.8% back to that, and $51.18 that would retrace 50% back to IYR's all-time high. It's possible that IYR can struggle higher to at or slightly above $52 before finishing. The 50% level, in addition to being a Fibonacci number, is also a classic amount for an Elliott Wave "b" wave to retrace. NOTE - the IYR price has already reached a symmetry of the second rally leg to the first part of it (so it can be a symmetrical ABC). If it falls under $37 before making a new high, it's mostly likely finished already. Otherwise, if it does make new highs, then the $48.38 and $51.18 areas would likely finish it.

Also below is a chart and discussion from "Chart of the Day" with a bearish-looking outlook on home prices. What does all this imply?

That the decline by real estate off the recent rally top is either the first step down in a move that will retest and likely fall beneath the lows. Or that it's a temporary pullback before making one more higher wave up, before it's ready to roll over. Either way, not something that whets the appetite of position investors. Nor does it make me want to run out and buy actual real estate on the theory that "it's bottomed and this is the best time to buy."

Remember that the "Chart of the Day" uses inflation-adjusted dollars. Of course, what this also implies is that if the dollar actually rises (shock!), then the realized current values will get dragged down by that deflationary factor alone. That's one reason why the "Chart of the Day" looks even more bearish than the charts people normally use for understanding real estate prices.

Chart of the Day - Home prices resume decline
September 25, 2009
Today, it was reported that the median price of a single-family home dropped 2.3% in August. The stock market sold off on the news. For some perspective into the all-important US real estate market, today's chart illustrates the US median price of a single-family home over the past 39 years. Not only did housing prices increase at a rapid rate from 1991 to 2005, the rate at which housing prices increased – increased. That brings us to today's chart which illustrates how housing prices are currently 30% off their 2005 peak. In fact, a home buyer who bought the median priced single-family home at the 1979 peak has seen that home appreciate by a mere 4%. Not an impressive performance considering that three decades have passed. Over the past two months, single-family home prices have resumed their decline and remain (until proven otherwise) in an accelerated downtrend.

Chart of the Day is provided without warranty of any kind and accepts no responsibility for its accuracy or for any consequences of its use. Journalists and bloggers may post the above free Chart of the Day on their website as long as the chart is unedited and full credit is given with a live link to Chart of the Day at http://www.chartoftheday.com