Details Cookies
United Kingdom
Important margin product information

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX or any of our other products work and whether you can afford to take the high risk of losing your money.

Cookie policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

Chart of the Week : Housing IS the business cycle Chart of the Week : Housing IS the business cycle Chart of the Week : Housing IS the business cycle

Chart of the Week : Housing IS the business cycle

Christopher Dembik

Head of Macro Analysis

Summary:  In today’s ‘Macro Chartmania’, we focus on the U.S. housing market. We believe that the housing market IS the business cycle in the United States or, at least, it plays a major role in the current cycle. Recent data confirms that housing will severely curtail in the coming months. Whether it will be a soft and a hard landing, it is still too early to say. Harder is the slowdown, higher is the probability of a recession or a recessionette this year or in 2023, of course. For the moment, a recession is not our baseline for the United States at Saxo Bank.

Click here to download this week's full edition of Macro Chartmania composed of more than 100 charts to track the latest macroeconomic and market developments. All the data are collected from Macrobond and updated each week.

The American economist Edward E. Leamer wrote an interesting paper at the eve of the Global Financial crisis in September 2007 : Housing IS the business cycle. While we don’t agree with all the conclusions, the main take fully makes sense. Over the past decades, the housing market has systematically played a key role in the U.S. business cycle. This is also the case in the current cycle. Economists but also investors certainly did not pay enough attention to the housing market over the last two years, especially early in the pandemic when massive stimulus had fueled demand and had increased price bubbles all across the United States (at national level, housing prices are up almost 40 % on average since the outbreak).

The housing market is now in a vulnerable position. With high inflation across the board pushing consumer confidence downward and mortgage rates surging above 6 % following the U.S. Federal Reserve’s tightening cycle, the risks of hard landing are tilted on the upside. Over the past few weeks, several large real estate firms such as Redfin Corporation or homebuilders such as Lennar (the second largest player in the United States) have warned against the risk of slowdown. Some of them have already introduced lower prices and incentives in certain areas to sustain demand. But it is too early to know whether this will be successful. At the moment, all the data confirm a material slowdown. The market is very unbalanced. In May, existing homes sales fell 3.4 % to 5.4 million units. This is a new post-pandemic low. They are down 17 % from January. The biggest and most worrying drops are in the Midwest, the West and the South. At the same time, median prices continue to jump (+15 % at $408 000 – this is a new all-time high). Inventory is very low at only 2.6 mo. Housing permits and housing starts are down in May too. Housing starts feel 14.4 %. This marks the third monthly decline in five months. Housing permits dropped by 7 % the same month. The market is a unique situation. The last time housing affordability was so low, it was in 2007 – see below chart. Expect it will get worse in the short- and medium-term. The surge in mortgage rates, which is only starting, is a major constraint for new home buyers. Adding to that the ‘rate lock’ at very low rates (this means the interest rate won't change between the offer and closing), expect also less housing mobility. This will have ripple effects on the whole economy, starting from the housing construction activity, with varying lags depending on backlogs.

Upcoming data from the housing market will help us assess whether there is a material risk of recession or not. The latest survey of professional forecasters shows a 20 % recession probability. When we hit these levels, the economy is usually already in recession. Economists have a poor track-record to accurately forecast recession. There are only two exceptions : in the early 1980s when the Fed chair Paul Volcker jacked up rates to kill inflation (but it was so obvious that even economists saw it coming) and in 1995 when it ended up in a soft landing. We are currently not forecasting an upcoming recession in the United States. The probability it happens this year or next year will highly depend on the evolution of the housing market. But there is no debate we are going to be in much lower growth, especially in 2023 than many had expected, technical R or no R. The material growth slowdown is visible across all the data. 


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
United Kingdom

Support Centre
For existing clients, please click here to request support via the Support Centre.

Have a question about our products, platforms or services? Visit the Support Centre to find answers for our most frequently asked questions. If you are still unable to locate an answer to your question, you will also find contact details for your local Saxo office to speak with a representative.

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.