Relative to Average Path other Assets Have Taken from Bubble Tops, Homebuilders, Despite 135% Rally, Remain Under-Valued

At the end of March 2012 I noted homebuilders appeared very under-valued vs. other bubbles at this juncture of their bubble peak price. I presented the chart below to justify this.

Since that original post, the S&P Homebuilder Index has rallied ~20%.

That said, the index still sits at only 32% of its peak value of 1,306 in 7/2005, which was 364 weeks ago.

The average value at +364 weeks after a peak for history’s other bubbles is +49% (excluding silver, which was at only 14% of its peak 1980 value at +364 weeks; even with silver the average is still 39%).

Using this average, the implied fair value of the S&P Homebuilding Index at this juncture is~640.

Therefore, despite a ~135% rally off last summer’s lows, the index is still ~53% under-valued.

What makes this analysis so incredibly compelling is that excluding Silver off its 1980 peak, every single other asset clusters around that exact ~+50% of peak value area at the +364 weeks juncture, shown in the chart below.

In effect, we have a rather precise, uniform target that other bubbles have traded at here that the homebuilders could reach in short order.

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