Recent macro data out of the US economy was too much of a good thing. Last month’s cross-asset malaise was a testament to that.

During the first several weeks of 2023, a resilient labor market was interpreted by investors as evidence in favor of the “soft landing” narrative, but once the “no landing” scenario entered the lexicon, good news was made bad again.

Frustrated, thoroughly exhausted market participants now find themselves confronting a ridiculous quandary: The better the data, the more likely a hard landing is given the read-through for Fed policy.

In a new note, Goldman said the most likely source of re-acceleration for the US economy is consumer spending. Indeed, the bank described the case for upside to consumption forecasts as “compelling,” and noted that a resilient consumer could ultimately force the Fed to hike to 6%.

Another possible source of upside is housing, but on that front, the bank’s Spencer Hill doubts the rebound in December/January will prove sustainable.

As a reminder, pending home sales jumped sharply in January, as did new home sales and February builder sentiment. And yet, a widely-followed index of purchase applications recently hit consecutive 28-year lows and prices are falling for the first time in over a decade on a YoY basis, according to Redfin.

Although the Fed’s rate hikes arguably haven’t impacted the real economy in any material way, the exception is housing, which pretty much has to obey. Indeed, the residential investment component of GDP has been a drag on growth for seven straight quarters, a stretch that’s historically been associated with recessions.

“Housing accounted for all of last year’s GDP growth shortfall relative to potential [so] even a stabilization in this component would contribute to GDP acceleration,” Goldman’s Hill remarked.

The bank’s baseline scenario sees residential investment down 3.5% on a Q4/Q4 basis. In a scenario where it’s flat instead, GDP growth would be 0.15pp higher relative to Goldman’s forecast, all else equal. That, in turn, would present upside risk for Fed funds.

If you ask Hill, though, “extrapolating the January improvement” in housing may be a dubious exercise. He cited Redfin data which showed pending home sales trailing off close to recent lows again, along with the MBA apps gauge mentioned above and “most importantly,” the run up in mortgage rates, which are one weekly jump (or two) away from returning to cycle highs.

Goldman also cited unseasonably warm weather. “In addition to the short-lived pullback in mortgage rates, we believe mild winter weather also contributed to the apparent improvement in January housing data,” Hill wrote. Note the word choice: “Apparent.” Although that can be used two different ways, Goldman seems to be using it as a stand-in for “ostensible.”

Here’s hoping Goldman’s right. While it might seem as though a housing rebound would be a good thing given what it seemingly says about American families realizing “the dream,” when median home prices are still 30% higher than pre-pandemic levels and rates, even at recent lows, are more than double where they were in early 2021, what it actually says is that a lot of families are mortgaging their lives away — and in the process keeping prices elevated for scores of other families unable or unwilling to do the same.