Chart of the Week - The housing market is at risk

Callum Thomas

Topdown Charts

US Housing Market — Sudden Stop: As a result of the rate shock (a 3x jump in indicative servicing costs for a new mortgage), inflation shock (surge in living costs across the board), and portfolio shock (stocks, bonds, crypto, etc! all dropping significantly in value) — the purchasing power of home buyers has taken a massive hit, and it is showing up clearly in the house price data.

As of the latest data, the US housing market is undergoing what amounts to a sudden stop as prices collapse at the fastest (and most widespread) pace since 2008.

I continue to think that this will not be as systemic a risk as during the subprime crisis due to somewhat lower debt-to-income ratios and a lower proportion of adjustable rate mortgages… but it comes from a starting point of record high valuations (extremely stretched vs history): which creates the hungry bear situation of an overvalued market meeting a downside catalyst(s).

In that sense the decline in prices could extend much further than people expect and it is certain that this will have material negative wealth + confidence effects on the consumer. This will dampen spending plans in general, and have adverse knock-on effects across the housing and peripheral industries. Overall it’s just another piece of evidence adding weight to the 2023 recession thesis.

Key point: The US housing market is coming to a sudden stop.


NOTE: This post first appeared on our NEW Substack: (VIEW LINK)


Best regards,

Callum Thomas

Head of Research and Founder of Topdown Charts


Callum Thomas
Head of Research
Topdown Charts

Callum is Head of Research at Topdown Charts. Topdown Charts is a chart-driven macro research house covering global Asset Allocation and Economics.

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