MudHen

Economy is in trouble and is deteriorating. Although housing is an early cycle segment of the economy, any recovery will be too late given a 3 month moving average to bring the index over 350.

The housing index appears to be rolling over well short of the 350 level. The past periods when the index rolled over (although only 2-3) suggests a long period to regain the past level. The US economy is close to a recession, which if one occurs would tend to result in a longer recovery (certainly with stocks). Persistent inflation argues against a significant decline intermediate interest rates. Some of the current house price level came from a one off increase in house prices post COVID that had weak economic fundamentals and could erode further than a cyclical reversal. Finally, the fact that the index is a 3 month moving average would tend to dampen the index.

budget request of $26 billion will be slightly discounted

The current trend appears to be rolling over with lower growth in the 3 and 6 month moving averages. The 3 month moving average would have to consistently increase by 0.9% each month to reach 350 in the series. Anecdotal reports on house sales suggest a continuing softening, which will probably not reverse through the winter months. Past periods that showed adequate price growth were characterized by low rates and strong economic growth. Although the economy appears to be holding up strength is limited to the top 10% of the income distribution a feature that is unlikely to support growth in this index. Rate declines have a lagged effect: historically this lag is 6 to 12 months. Therefore, rate declines will probably not have a meaningful impact over the forecast period.