US Housing, Jobs, Economy “Set For Big Trouble”

Tuesday, January 23, 2018
By Paul Martin

by Chris Hamilton via Econimica blog,
ZeroHedge.com
Tue, 01/23/2018

I recently wrote an article explaining why a 30% to 50% decline in household net worth is imminent (HERE). No shocker that the primary asset for most in figuring household net worth is real estate, particularly primary residences. This article details why US housing starts and job creation are set to decelerate and a recession will almost surely follow… sending home prices tumbling (and likely equity and bond prices, to boot) severely negatively impacting US households net worth’s.

First, the year over year change in housing starts (one unit variety) is highly indicative of the subsequent change (in 12 to 18 months) of full time employees (chart below…year over year change in full time employees blue shaded area) vs. YoY change in housing starts(red line)). As goes housing, so goes subsequent jobs creation.

So then, what impacts housing creation?

The chart below shows three variables on a quarterly basis:

The federal funds rate (…black line)
Federal Debt (year over year % change…red line)
Housing Starts, 1 unit private houses (year over year % change…blue columns)
What is so noteworthy is the interplay of the changing debt creation and federal funds rate on new house creation. As debt spending accelerates, interest rates are cut…and housing creation is prolific.

Conversely, when rates rise, typically federal debt creation decelerates…and housing creation declines.

The charts below show housing starts and federal debt on a year over year percentage changes (on a quarterly basis). Federal funds rate is actual quarterly rate.

The Rest…HERE

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