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Real Estate

Is the housing market standing on shaky ground?

This red flag could signal growth slow down

While most experts agree the housing market is on solid ground, some are beginning to question red flags that are beginning to arise, possibly showing a slowdown in growth.

Monday, the National Association of Realtors reported a drop in existing home sales for the third consecutive month.

Now, one expert wonders if the current growth in housing and the economy is sustainable headed into the second half of 2018.

“On an annual basis, existing home sales continue to extend their slump, retreating at a negative pace for five of the past six months, the weakest streak of sales since 2014,” Stifel Chief Economist Lindsey Piegza said.

“While a number of other factors suggest the U.S. economy is still on solid, albeit far from robust footing, weakness in housing raises a large red flag regarding the sustainability of domestic growth heading into the second half of the year,” Piegza said. “After all, existing home sales help drive other sectors of the economy including consumer confidence and spending, as well as construction and lending activity.”

However, one retired economist turned blogger suggested that low existing home sales are not as large of a problem, and there is actually a more significant factor to measure in the housing market.

“As I noted last Friday, I think it is likely that existing home sales will move more sideways going forward,” Calculated Risk writer Bill McBride said. “However, it is important to remember that new home sales are more important for jobs and the economy than existing home sales.”

He explained that new home sales continue to increase annually, indicating there is no recession in sight.

But he might be alone in his sentiments, and while housing might be on solid ground, most experts expect the next recession to occur within the next two years.

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