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Think Tank Claims Housing Markets Point to Recession


A new forecast issued by the Council on Foreign Relations, a Washington, D.C.-based think tank, is using housing market data to predict a recession prior ahead of the 2020 election.

 

In the blog posting “Housing Market Points to Recession By Election Day” by Benn Steil, senior fellow and director of international economics, and Benjamin Della Rocca, analyst in the center for geoeconomic studies, declining home prices are identified as the first piece of a domino chain that will drag down the economy. The authors also insisted that “the trend-line in existing-home sales growth has also been down since 2015, tipping into negative territory at the start of last year. Similar drops have preceded nearly every recession since 1970.”

 

Furthermore, the authors insisted the Federal Reserve’s rate cuts will have no impact on stopping a recession.

 

“Well, if we are really on the cusp of a recession it will likely take more than 175 basis points of easing to prevent it—and that is all the central bank has to play with before we’re back to the zero lower bound,” they wrote. “At that point, applying monetary stimulus becomes considerably more challenging.”

 

Most economists define a recession of two or more quarters of negative GDP growth, which the blog post did not address. Federal Reserve Chairman Jerome Powell has publicly declared there was no recession in the near future.

 

“Our main expectation is not at all that there will be a recession,” Powell said last month. “The U.S. economy has continued to perform well and is in a good place.”



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