Leading indicators point to another housing downturn

Robert Shiller makes the case for another downturn in housing, including the fact that leading indicators are negative:

Today, we need to worry about strong headwinds, as the government begins to withdraw its support of a still-troubled lending industry and as foreclosures are dumping millions of homes onto the market.

Consider some leading indicators. The National Association of Home Builders index of traffic of prospective home buyers measures the number of people who are just starting to think about buying. In the past, it has predicted market turning points: the index peaked in June 2005, 10 months before the 2006 peak in home prices, and bottomed in November 2008, six months before the 2009 bottom in prices.

The index’s current signals are negative. After peaking again in September 2009, it has been falling steadily, suggesting that home prices may have reached another downward turning point.

It seems, perhaps, that the people inclined to be seduced by the first-time home buyer tax credit (yeah, I'm talking about you David) took advantage of it early, causing a temporary blip in a longer downtrend.