Data for the median sales price (MSP) of new houses was released this past week on FRED, and the data is showing a distinct correlated negative deviation which is generally evidence that a non-equilibrium shock is underway in the dynamic information equilibrium model (DIEM).
I added a counterfactual shock (in gray). This early on, there is a tendency for the parameter fit to underestimate the size of the shock (for an explicit example, see this version for the unemployment rate in the Great Recession). The model overall shows the housing bubble alongside the two shocks (one negative and one positive) to the level paralleling the ones seen in the Case Shiller index and housing starts.
This seems like a good time to look at the interest rate model and the yield curve / interest rate spreads. First, the interest rate model is doing extraordinarily well for having started in 2015:
I show the Blue Chip Economic Indicators forecast from 2015 as well as a recent forecast from the Wall Street Journal (click to embiggen):
And here's the median (~ principal component) interest rate spread we've been tracking for the past year (almost exactly — June 25, 2018):
If -28 bp was the lowest point (at the beginning of June), it's higher than previous three lowest points (-40 to -70 bp). Also, if it is in fact the lowest point, the previous three cycles achieved their lowest points between 1 and 5 quarters before the NBER recession onset.
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Also, try to avoid the use of dollar signs as they interfere with my setup of mathjax. I left it set up that way because I think this is funny for an economics blog. You can use € or £ instead.
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