Some market watchers like to argue that the message on the covers of widely circulated print periodicals are contrarian indicators of the market.
Rather than calling it an outright contrarian indicator, the housing experts at John Burns Real Estate Consulting consulting believe it is indeed a lagging indicator.
“Magazine covers tend to focus on what is happening in home prices, which is a lagging indicator,” writes Rick Palacios Jr. of John Burns. “Note how Phoenix home prices were up in 2005/2006, which was the best time to sell, and down in 2011, which was the best time to buy.”
For now, they don’t believe we’re in a danger zone for housing.
Below’s a chart of John Burns’ proprietary home price and risk indices.
“When the HCRI increases from a D to a B, it is time to invest,” writes Palacios. “When the index falls from a B to a D, it is time to divest. When the HCRI has reached a C or better and is improving, we recommend investing with more optimism, including investing for the long-term.”
We may not be headed for a housing crash. But the return of housing optimism may be a sign we’re topping.