The Housing Market is Predicting a U.S. Treasury Bull Market

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In my previous article, I discussed how the U.S. Treasury yield curve foretells an imminent bull market in U.S. Treasury bonds. This article corroborates those findings from the perspective of the housing market.

Among leading indicators, the housing market predicts economic activity with the longest lead time. Housing market indicators peaked far before the last three recessions – before the yield curve inverted, the Fed finished raising rates, U.S. Treasury yields peaked, and even before the index of leading indicators (of which building permits is a part) peaked. Logically, because the housing market represents the full breadth of the economy and its health is negatively affected by higher interest rates, it has slowed well before other indicators. An article on this here.

Of the many housing indicators, four have the longest history and most reliable leading properties. In their charts below, notice that the business cycle peaks (orange circles) precede the peaks in the 30-year yield (red lines) which come before the recessions (gray bars).