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Housing market again is signaling for a recession
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Loading...World economic growth projections in 2019 and 2020 were again reduced. For 2019, from 3.6%, the forecast is down for growth by 3.3%. This is even seen as even an even more optimistic forecast that they drew in April from the International Monetary Fund.
The worsened expectations were only boosted by the comments of William Emmons, who is the leading economist at the Federal Bank of St. Louis. Louis's Center for Household Stability. He warns that again the first signs of recession come from the housing sector. Recession that may occur later this year or in the first half of 2020.
The slump in the mortgage market preceded any recession in the US since the Second World War, with four indicators that we should watch for early signs of economic turmoil. Declining interest rates on 30 - year mortgages, sales of existing housing, real (inflation - adjusted) house prices and investment contribution by each household to increasing local GDP.
Falling interest rates on mortgages since the last peak of the economic cycle have preceded the last three recessions with four to seven quarters.
The extent to which existing homes are sold is decreasing, and this has deepened in the last two quarters. This is a pattern that has been repeated before the last three major recessions. Emmons interprets the current market model as an indication that there is a recession in the last quarter of this year. Property prices continue to grow, but not so fast.
Household's contribution to GDP growth is generally negative, and is very "similar" to periods before the recessions in 1991 and 2001.
Still, no one knows when the next recession will occur. Even Emmons acknowledges it, but the current indications, along with the reversal of the yield curve, suggest that economic turmoil soon ensues.
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