In May of 2005, we introduced the InvesTech Housing [Bubble] Barometer to keep a real-time pulse on the rapidly expanding housing bubble. This leading housing indicator was designed to track the stocks with the greatest sensitivity to the housing market. Our barometer peaked almost immediately after its debut, and just a few months before the top and subsequent six-year decline in housing prices.
Following the onset of the COVID-19 pandemic, the Federal Reserve slashed interest rates to zero and pumped trillions of dollars into the economy, which then ignited a frenzy in the housing market for the second time in as many decades. Homebuyer demand soared, as did housing prices, which grew by a record 20% from the year before! Unsurprisingly, our Housing [Bubble] Bellwether Barometer skyrocketed to an all-time high for the first time since the height of the housing bubble 15 years earlier. Going forward, a reversal in this leading indicator will likely signal that the housing bubble is beginning to unwind, just as it did in the mid-2000s…