Lakshman Achuthan, co-founder of the Economic Cycle Research Institute and market prognosticator, says there is a major warning sign in the housing industry.
ECRI's U.S. home price index dipped below zero into negative readings in April 2018, and while the S&P Case-Shiller home price index is not negative, it is slowing down. This week in an interview with CNBC, Achuthan said, "Our leading home price index has made a downturn that it hasn't made in a long time," adding, "The last time it was this weak … was in 2009 coming out of the last recession, and this leading index in 2006 really did call the housing bust."
"I wouldn't say there's a housing bust here now, but directionally we have a home price growth downturn," Achuthan said. "For the overall economy, we have a yellow light. We think there's a slowdown that's happening here but on the housing and home price growth, absolutely it's a red flashing light." Falling home prices are not just a problem for the housing market; they could easily spill over onto the broader economy, he said.