Housing Slumps and other Economic Indicators

A BusinessWeek article (www.businessweek.com/magazine/content/07-04/c40180008.htm) says that if the current Housing Slump is over already then we are very lucky as the amount of Housing Starts have dropped only 24.4% since hitting a high in February, 2005. Since 1959 there have been seven housing cycles which average a decline of 47.3% when they fall. The biggest drop was 63.7% in the early-mid 1970's. There has been a pretty solid rise since 1991 with only little corrections.

I've lost the link to a good chart from a Website called "The Econtrarian" (article "Near a Bottom in Housing?" Nov. 3, 2006) that shows these Historical peaks and troughs but the following are roughly the dates for the cycles. Eventually I hope to find some astrological correspondences.

Peak: Jan 1959
Trough: end of 1960 -36.2%

Peak: 1963
Trough: 1966 -53.7%

Peak: end of 1968
Trough: Jan, 1970 -38.7%

Peak: Jan. 1972
Trough: Feb. 1975 -63.78%

Peak: 1978
Trough: Phase 1 - Jan. 1980
Phase 2: end of 1981 -60.9%

Peak: Late 1983 to 1986
Trough: 1991 -59.5%

Mostly Uphill.
Small Drop Dec. 1998 - July, 2000 -18.4%

Peak: Feb. 2005
Trough: as of Nov. 2006 the drop -24.4%


So, I remember two phrases that the Teacher in my Stock Market Class repeating over and over again in his Sing-Song Voice regarding investing in the Stock Market. The First Phrase was "the Trend is Your Friend." The Second Phrase was "The Interest Rates go Up, the Stock Market goes down. Diversify. Diversify. Diversify."

I took that class back in the early 90's. Since then all the rules seem to not work anymore. Found a link (http://mortgage-x.com/general/indexes/prime.asp) for Historical Listings of the Interest Rates from 1947 to present. This list shows the Prime Rates. The Prime Rate is the Base Rate charged for Corporate Loans by the Majority of Banks in the U.S. Historically they take one big wide swing one up and then down as follows: They seem to be on the upswing now, hopefully won't lead to the big Inflation of the 70s and 80s again.

Low Rate: 1.75% December 1947

High Rate: 20% Apr. 2, 1980 That's kind of like what the Mafia charges, isn't it? And if you don't pay it then they cut off your leg.

The lowest Rate since then was 4% on June 27, 2003.

Economic Indicators that are used to predict the Interest Rates are explained at that same website (http://mortgage-x.com/general/indicators.asp). These are: Gross Domestic Product; Consumer Price Index; Producer Price Index; Employment Situation; Payroll Employment; Unemployment Rate; Consumer Credit; Housing Starts. Interesting, I don't believe that actual Housing and Real Estate costs are included yet this is where most of a person's income sinks into. Probably, I've got this wrong.