A for sale sign stands before property for sale in Monterey Park, California. Frederic J. Brown | AFP | Getty Images

A Federal Reserve economist says the current housing backdrop is similar to recent economic slumps, with several metrics "consistent with the possibility of a late 2019 or early 2020 recession." "Data on single-family home sales through May 2019 confirm that housing markets in all regions of the country are weakening," the St. Louis Fed's William R. Emmons said in a report posted on the central bank district's site. "The severity of the housing downturn appears comparable across regions—in all cases, it's much less severe than the experience leading to the Great Recession but similar to the periods before the 1990-91 and 2001 recessions." Specifically, Emmons looked at sales numbers for the 12 months ended May 2019 compared with the average over the past three years. He uses December 2019 as the "plausible month for peak growth" in the current case, and then looks at how far back from the peak was the first month in which sales fell below their three-year average in the previous three recessions.

The process may seem at least somewhat opaque, but Emmons said it has been a reliable indicator from the housing market for when the next recession is due — usually about a year away, according to historical trends. In the Northeast, for instance, August 2018 was the first month that sales fell below the region's three-year average. That would be 16 months from the December 2019 assumed peak. In the previous recessions, the first negative month respectively came 23, 10 and 21 months before the peak. That would put the current pattern within the historical range, Emmons wrote. These charts look at how each region stacks up. The four lines each represent a recession; the deviation of the 12-month sales average toward the three-year average decreases until it goes negative; the charts then show how long it took before a recession hit: In addition to the sales numbers, Emmons said current mortgage rates, inflation-adjusted house prices and residential investment's contribution to economic growth are similar to patterns that preceded the most recent three recessions. Single-family home sales work best as an indicator, he said, because the other metrics are national in nature and thus don't reflect whether the deterioration has spread through all regions. "Considering signals from other housing indicators and from indicators outside housing with good forecasting track records (such as the Treasury yield curve), the regional housing data noted here merit close attention," Emmons wrote.

Calling for rate cut