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| === 2. Housing Market Activity === | | === 2. Housing Market Activity === |
| Housing accounts for a significant portion of investment spending by American households and overall economic activity. And has a significant impact on other industries, including labor, construction, raw materials, consumer durables, banking, and real estate. According to Leamer<ref>https://www.nber.org/system/files/working_papers/w13428/w13428.pdf</ref>, in six of the ten recessions since 1950, residential investment was the greatest contributor to weakness prior to the recession with an average contribution of 22% of weakness in gdp 1 year prior to the recession. And that an unusual residential investment contribution to GDP growth in one quarter predicts twice as much contribution from some other sector the next quarter.
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| In the residential investment data displayed in Figure 12 there is one false positive in 1951-2 and another in 1966 -67. In both cases housing was weakening substantially but there was no recession. Why is that? Those two false positives occurred coincidentally with a big ramp-up in defense spending for the Korean War and the Vietnam War. Alarms of forthcoming recessions that were met by a response that prevented the recessions from occurring.
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| Also important to point out that is volumes that matter for real GDP accounting, not prices. Prices can matter indirectly through a wealth effect, but be a little skeptical about this. And that the sluggishness of price adjustments is what makes the volume cycle so extreme, and what makes housing so important in recessions.
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| Current data: | | Current data: |
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| # Pending Home Sales in the United States decreased 33.80 percent year-on-year in December of 2022. <ref>https://tradingeconomics.com/united-states/pending-home-sales</ref>
| | * Pending home sales in the United States decreased 21.1% year-on-year in February of 2023, following a 24.1% fall in January, and marking a 21st straight month of declines.<ref>https://tradingeconomics.com/united-states/pending-home-sales</ref> |
| # Building permits in the United States rose 0.1% from a month earlier to a seasonally adjusted annual rate of 1.3 million in January 2023, hovering close to the lowest since May 2020. Building permits is down 30% since peak in dec 2021. <ref>https://tradingeconomics.com/united-states/building-permits</ref>
| | * Building permits in the US were revised higher to a seasonally adjusted annual rate of 1.55 million in February of 2023, from an initial estimate of 1.524 million. It remains the highest reading in five months<ref>https://tradingeconomics.com/united-states/building-permits</ref> |
| # Real residential investment GDP on Q4 2022 was -26.7%<ref>https://www.bea.gov/sites/default/files/2023-01/gdp4q22_adv.pdf</ref>
| | * The NAHB/Wells Fargo Housing Market index in the US increased for a third month to 44 in March of 2023, a new high since September of 2022 and beating market forecasts of 40.<ref>https://tradingeconomics.com/united-states/nahb-housing-market-index</ref> |
| # The NAHB housing market index in the US declined to a low of 31 in December of 2022, it has recover to 42 in recent months, but still at a low level historically<ref>https://tradingeconomics.com/united-states/nahb-housing-market-index</ref>
| | * Real residential investment GDP on Q4 2022 was -26.7%<ref>https://www.bea.gov/sites/default/files/2023-01/gdp4q22_adv.pdf</ref> |
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| Since housing activity is the biggest driver in weakness in gdp prior to the recession, its success in predicting a recession, the fact that there is a low probability that there will be massive stimilus to avoid a recession due to the FED narrative and their fight against inflation, and the significant decline in activity that started in Q2 2022, there is a high likelihood that the recession risks in the US economy are amplified significantly in Q2 2023 onwards.
| | There is a high likelihood that the recession risks in the US economy are amplified significantly in Q2 2023 onwards due to housing market weakness, the activity has stabilized a bit recently, but numbers continue to deteriorate at a lower rate. |
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| === 3. Conference Board Leading Index === | | === 3. Conference Board Leading Index === |
