Investors are desperate for signals about any “pivot” by the Federal Reserve. It may be that US housing will be more important in forcing the Fed to ease than either inflation, or unemployment.
Over the last century, housing has helped define the swings in the economic cycle, being a key driver of investment, employment, and consumption (especially white goods). As one recent research paper put it. “Housing IS the Business Cycle”.
Easy monetary and fiscal policy, post-pandemic, has helped fuel 20 per cent US house price inflation (the fastest seen since December 1946). Three-year house price inflation of 46 per cent in nominal terms and 28 per cent in real terms has only been matched by the bubbles of the early 1980s and mid-2000s in the past 70 years. However, these “good times” for US housing look to be ending as property faces a perfect storm of rising financing costs, squeezed demand and increased supply.