Housing starts are a very reliable leading indicator for the US economy. They fell by 4.5% in January, and the trend is firmly down. However, they are still some way above the GFC 2008/9 lows. These data point to a recession, though not (yet) one as deep as the GFC.
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| Source: Trading Economics |
Existing home sales in the US, like most time series associated with the housing sector, lead the cycle.
The chart below shows home sales vs my monthly indicator, which tracks GDP quite well. Note how home sales peaked in 2005, but only really started to fall fast in 2007. This plunge preceded the GFC (global financial crisis) of 2008/2009. History seems to be repeating itself. However, as bond yields and therefore mortgage rates may have peaked, home sales may be close to a trough. If there is a deep recession, the trough may be postponed. Banks are in a much sounder financial state than they were then, on the face of it, but there's plenty of debt owed by emerging markets and zombie companies. What drove the GFC to its depths was actual and potential banking collapses. What will (most probably) drive the current cycle into its depths will be the surge in commodity prices, which only peaked in June last year, and central banks overtightening.
