Housing and Recessions — Bill McBride

Now that new home sales have reached a new cycle high (in June), I'd like to update a couple of graphs in a previous post (most of this from an earlier post).

For the economy, what we should be focused on are single family starts and new home sales. As I noted in Investment and Recessions "New Home Sales appears to be an excellent leading indicator, and currently new home sales (and housing starts) are up solidly year-over-year, and this suggests there is no recession in sight."…

Although new home sales were down towards the end of 2018, the decline wasn't that large historically. As I noted last Fall, I wasn't even on recession watch. Now new home sales are up solidly year-over-year. No worries....

Calculated Risk
Housing and Recessions
Bill McBride

Brian Romanchuk — Real Estate And The Cycle

Real estate -- particularly residential real estate -- is an extremely important factor when discussing recessions in the modern era. To a certain extent, real estate is where economic theory goes to die. One possibility is that the theory was largely developed when the norms in real estate investment were conservative, so attention was moved to the industrial sector. However, the herd tendencies in the housing market may now overwhelm the industrial cycle.

(This article is a set of notes about the housing market. I started laying out my book on recessions, and I realised the need for a chapter on housing investment. I want to lay out some of the ideas that I mulled over while I was losing in a curling tournament down in the United States. The article is somewhat long on assertions, and missing the research to back up those statements. I will be filling the details as I turn to that chapter.)...

Bond Economics
Real Estate And The Cycle
Brian Romanchuk

Li Yan — Economy still relies on housing market

Urbanization.

ECNS
Economy still relies on housing market

Li Yan, Global Times

Noah Smith — The hard-money people throw Gene Fama under the bus

I think where one does see evidence of prices higher than they would be otherwise is likely in equities were low borrowing rates decrease the cost of margin (leverage). Cost of margin is hugely influential in speculative markets.

Housing "bubble" reigniting? No way. Prices are still way down from their highs, a historically high percentage of purchases of existing residential RE are foreclosure or underwater related and for cash, with Wall Street and flippers big buyers in expectation of exceptional ROI on resale. Rent/purchase ratio is still reflecting the bursting of the bubble, and new housing is not exactly "on fire." There is not going to be another housing bubble in the US for years and there are still housing bubbles to pop abroad.


But it's good to see the inflationistas in retreat and throwing the EMH under the bus, too, in favor of financial instability. But is the Fed creating financial instability now? No way. The Fed is still fighting the consequences of financial instability and not all that successfully.

Noahpinion
The hard-money people throw Gene Fama under the bus

Noah Smith