Recession Watch USA: Housing Market Points to Recession By Election Day

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Wasn’t there an article a week ago that said deliquent mortgages are at extremely low rates? So doesn’t that indicate that people can pay their mortgage bill?


Good lord this is some lazy garbage. For shame. They should probably read their damn sources. > Our assessment is that a housing slowdown by itself may slow consumer spending and GDP growth some; however, it is probably insufficient to precipitate a downturn without some additional shocks outside of the sector. First, the amount of consumer spending more or less mechanically tied to housing transactions is fairly limited. Second, while the precise size of the wealth effect from gains in home prices is problematic, plausible estimates do not suggest that consumer spending growth would cease if there was a decline in home values on the order of recent gains. Third, it appears that much of the recent home equity withdrawal has been used to restructure household balance sheets as well as to finance consumer spending decisions based on fundamental consumption determinants (such as expected income growth) rather than on the availability of this source of funds. Also their predictor is a very poor one. It has predicted most of the recessions in the last 50 years if you allow a three year lag time and has a 33% false positive rate. That’s not a hell of a lot better than flipping a coin.


Or you know a correction in housing prices that have been way too high for years.


Here in the Silicon Valley home prices are down ~10% from their peak last year. This imho is NOT a sign of recession. The housing market has been in a unique situation for too long. Not enough houses were up for sale and too many FANG millionaires. Boomers retire but don’t want to leave so they stay in their houses. People were pushing the envelop of acceptable risk when taking a mortgage here, using more than 43% of their available income for a mortgage. However prices reached the limit. People refuse to pay more. Further the high prices have made multiple construction projects lucrative translating into hundreds of units being pushed onto the market. A good indicator of the economy is defaults or delinquency on debt. If it increases it means more people are unable to pay their loans, banks can’t loan out more and find their risk of default higher, people tighten spending, a credit crunch ensues. This is not the case at the moment. Delinquency is below historic averages and is steady (Fred). So i don’t see recession yet.


The Council on Foreign Relations, a political entity, is probably not the “go to” source for economic forecasting.