Technical analysis of real estate market

Please post your comments as you vote. Thank you.

How about, “Yes, but hardly anyone does it or know how to do it?”

Robert Campbell wrote a book on how to time your real estate market using technical analysis.


Campbell’s book shows you how he used charts of existing home sales, building permits, foreclosures, and interest rates for his San Diego real estate market to determine the optimum time to buy or sell real estate in his market. He shows you how to construct the charts for your own local market, how to read the chart “oscillators”, and how to know when the charts are giving you buy and sell signals.

If this is not technical analysis, then how would you define technical analysis for a local real estate market?


Yes, I certainly use technical analysis to help determine what will happen in the future. For example, the charts indicated (and are predicting) what has happened and what will happen during the current real estate “bubble” and “bust” cycle. I’ve been around long enough to know that every time we’re in these things, the majority always seems to think that this time it will be different. It never is.

However, the real estate market is so slow as compared to the stock market that you don’t need to be looking at the charts on a daily or even weekly basis, let alone real time like stock traders do.


 This is a really interesting idea.  It seems to me that the caveat would be: instead of having a chart represent a stock (a company), you would have to have a chart represent a geographic area, like a city or a neighborhood.
 Also how would one determine open price or close price?  The timeframe could not be one minute or one hour there wouldn't be enough data.  To collect enough data, one would need to survey a huge geographic area in one day, and price would vary based upon local economies.
 The prices would have to be conducive to accurate representation of market values (the high low on 3bed/2 bath SFHs would be pretty varied, based upon construction technique, local views, rental incomes, and again, neighborhoods.
 So, to get an accurate portrayal of technical activity, one would need to collect data over a long period of time in fairly small areas (million dollar 3/2s in this neighborhood, slum ghetto 3/2s in that neighborhood).
 Even with an adequate length of time to collect data, would there be enough data to draw a moving average convergence divergence histogram, for example, and would it's findings be relevant by the time you collected enough data to draw the indicator?
 Most stock investors do not make decisions based upon technical analysis alone.  Without fundamental analysis, you are making decisions grounded in statistical probability without consideration of debt, sales, profits, revenue growth, new produts, bad or good management....ect
 cool idea
 Yes, I am a nerd.  :anon
 There are two more points that come to mind.
 First, if a day trader uses primarily technical data to make decisions, then their strategy works because they buy at a buy indicator, then sell at a sell indicator.  Anyone can put their house on the market, and it is up to the buyer and an appraiser to figure out if the price is above, at or below market value.  So the approach is reversed.  You don't say "it's time to buy in neighborhood or city X", then buy, you ask "is this seller asking a price that is a good value for city X?"  and if the seller will take 30% below market value, then it's time to buy.  Similairly, when amateurs keep buying a stock that professionals believe to be overvalued, the professionals sell.  How would you do that if selling at the retail price of your property will take 6 months?
 Of course, buy low and sell high "irrational exuberance" and panic of crowd psychology still apply.
 Another point: let's say you have a slow moving average and a fast moving average, like on moving average convergence divergence.  You're measuring values in neighborhood X, which has falling house values.  Some of the houses in this neighborhood have a view of a canyon and a river, some houses in this neighborhood are next to the freeway.  A business with high income employees moves to a different city.  So all the rich folks with a view of the canyon move to the new city.  All of the expensive houses sell in a short period of time, for less than what they are worth, but more than the neighborhood average.  Your fast moving average is going to show oversold conditions by tracing a reversal.  The indicator says it's time to buy, but the trend is acutally that homes are losing value in this neighborhood.  This condition occured because of the difference in home values in the same neighborhood.  No one share of Google is worth any more than any other share of Google.

I’m not sure this idea has merit at the individual deal level.

When you look at technical analyses to help you decide whether to be long or short a stock or a commodity, the major things that allow you to act on it are (1) a liquid market and (2) uniformity (that is, all shares of the stock are the same and a pork belly is a pork belly).

In the real estate market, you can’t run an analysis and decide that a particular house or property is a good deal. You might decide that it’s a good time to buy a certain REIT or maybe even decide that a particular market, on avergae, is oversold or overbought…BUT, even in oversold markets there will be properties that are overpriced relative to their peers, and in overbought markets there will still be properties that are good deals.

And if you’re like most real estate investors (again, at the specific deal level), you’re confined to the market in which you live, anyway, so what’s the point of knowing that “%K has crossed over %D” in the Atlanta market? I have to buy and sell here regardless of what the charts tell me.

It still won’t work because you are talking about taking macro variables and applying them to a micro decision. Also, there are factors that make nearly identical properties worth more or less than one another that you will either never have access to or can not quantify so that you can put them in your database (condition, location, seller motivation, etc.).

Real estate is not nearly as efficient a market as stocks and commodities. Most of the information is not “out there,” and there’s not anywhere near the same level of instant liquidity.

You don’t get a discount on IBM because the shares are in bad shape; they are all the same. And you don’t get a discount on IBM because you can pay cash today.

I just don’t think you’re on to anything here, but I am sure you won’t let that stop you, as well it shouldn’t.

Ok, Paul, thanks again, but you are saying things i know again… I udnerstand that there are tons of factors (view, condition, interior, etc), and udnerstand that they are impossible to calibrate and meaure (questioned). And I understand that there are no prices like in stock or commodity markets. I understand that information is not “out there.” And I udnerstand that the market is slow. BUT… please just assume for a second that we solve the first two problems, meaning the tons of factors and the price dynamics. imagine we have a square foot as an instrument, very standardized, as if the market prices were simply equal to the number of these square feet multiplied by the price. and imagine we trace price every hour. just imagine that. I udnerstand that the time factor we cant change so we only have it left. So, given the uniform and standardized market and live prices, can we still use technical analysis in such a slow market?

waiting for more fresh ideas… thanks

I agree with Paul. I can go into a bad market and find a guy who wants (or has) to sell for less than the going rate. I can make money even if it is a horrible market as long as I buy a property right.

On the other hand, you can’t find a guy who needs some fast cash and buy his Microsoft shares at half price. It just doesn’t work like that. What I’m saying is that the stock market is much closer to perfect information than the RE market.

The best place to make money is where you have information that others don’t. For me, it happens much more in RE.

jharris, the stock guy you mentioned with msft shares won’t sell them for half price cause he knows he can go and sell them anytime for the real market price set by the stock exchange… there is always demand and supply (hopfully) in stock markets, except for such cases as google (demand) and enron (supply)… in real estate, however, there is no standardized place to sell and buy, so the guy in need of immediate cash can’t go to real estate exchange and sell his house for a market price… because of the problems described above (factors and market price), real estate exchange is impossible ( :banghead), which is why he will sell the house for half price… BUT, somewhere out there a guy wanting to buy such house is looking for him… but there is no place to unite them, like the exchange

You are right, and because of that, I make more money. :bobble

Technical analysis is used in the real estate market on a daily basis, and by people that don’t even realize they are using it. Technical analysis is more about the activity in a given market rather than the intrinsic value of the items (stocks, land, houses etc.) traded in that market. We all look at interest rates, market activity, building permit activity, population growth, employment growth etc. when we evaluate a real estate purchase. These are all technical indicators of the activity in the marketplace and lead us to make decisions about when and where to buy. We are all just closet technical analysts.

The way I define technical analysis, your example would not apply. Those are more fundametal than technical. A technical analysis is driven usually only by price (but perhaps in some cases also by volume). Technical analysis says, “All known factors drive the market price, so the price is the only piece of data worth following.” I doubt that even 0.1% of the people here are using stochastics, moving-average convergence-divergence (MACD), or Fibonacci retracements when looking at all the fundamental data you mention.

But, I could be wrong.

As for the original poster, I give up.

71tr, you are WRONG! “interest rates, market activity, building permit activity, population growth, employment growth” are elements of FUNDEMANTAL analysis, not technical… Paul is right… … technical analysis is based on graphs ONLY, implying that the price already includes all the necesary factors you listed… so, your statement is incorrect!

Paul, thats what i try to do, and i encounter problems mentioned in previous posts, :banghead but i don’t give up… :bobble

please, guys, contribute to the discussion… any thoughts on this issue are appreciated… thanks

the one who voted “yes, its widely used” please say something to support your view or identify yourself at least… thank you

Easy there Crash, don’t have a heart attack. Yes, my examples were more in line with fundamental analysis I’ll agree.

you said you use technical analysis, but have you ever posted your findings onw the web? Would you mind to share? (im far away in Ukraine, so won’t use it)…

I tried to research the web, but i found no information… does it mean that technical analysis of real estate is useless? i just don’t get it… any thoughts?



I don’t use technical analysis in the manner a stock trader does. In other words, I don’t use it for daily purchase decisions. I use historic charts of home prices, economic growth, etc, to determine the big picture. For example, what can you deduce from this chart of inflation adjusted home prices for the past 116 years?


from the chart you linked, i can deduce that i can expect about a 30% - 60% decrease in home prices (don’t know if that chart is mean or median) some day…

however, if you tie that chart into this one:
i can deduce that housing prices will hold their value and continue to appreciate as long as the stock market does well… (this chart probably needs to be inflation adjusted to give a better picture against the chart Mike linked… same can be said if you put the chart you linked along with a chart of GDP (Real, Nominal, and Per Capita) since 1890.

maybe that’s the technical analysis… how do housing prices compare to the cost of Big Macs and Nikes?

my question is why do we measure these values exponentially? if we’re going to measure exponentially, and we expect a consistent level of exponential growth, we will always have a hockey stick… so, is real estate too far off its hockey stcik?

Are you suggesting that people make investment decisions in real estate based on 5-, 8-, and 21-day data?