In today’s Macro Chartmania column, we look at the US housing market. We believe that the housing market IS the business cycle in the US or at least plays a major role in the current cycle. The latest figures confirm that the housing market will slow down seriously in the coming months. It is too early to tell whether the landing will be soft or hard. Of course, the harder it is, the higher the probability of a recession or “recessionette” in 2023. For now, the prospect of a recession is not our central scenario.

In September 2007, American economist Edward E. Learner wrote an interesting article on the eve of the global financial crisis: Real Estate IS the Business Cycle. We don’t agree with all of his conclusions, but the main thesis holds true. Over the last few decades, the housing market has consistently played a key role in the US business cycle. This is also the case in the current cycle.

Economists and investors have not paid enough attention to the housing market over the past two years, particularly in the early days of the pandemic, when massive economic stimulus measures fueled demand and helped create speculative bubbles across the U.S. (nationally, housing prices have risen by an average of nearly 40% since the pandemic).

The housing market is now vulnerable
With rampant and widespread inflation eroding household confidence and real estate rates now above 6% as a result of the Fed’s tightening of monetary policy, the likelihood of a hard landing in the housing market is now higher.