In Housing Construction, The Last Domino Still Refuses To Fall

When it comes to housing construction, I’ve been waiting for the last domino to fall. Once again in July, it didn’t.

Freepik

Total housing starts rose 3.9%, but are -19% below their peak. Permits rose 0.1%, but are 22% below their peak. Units under construction, which is the “real” economic activity, rose 0.4% and is slightly, as in -2.7%, off its peak:

Single family permits are the most leading and least noisy data point. They were essentially flat, and both starts and permits are off about -25% from their respective peaks. Single family units under construction declined all of 5,000, and are -18.4% below their peak:

With the huge increase in the prices of houses after the pandemic, action shifted to multi-family units. Permits and starts for these were virtually unchanged last month. While permits are down -33% and starts are down -25% from their respective peaks, multi-family units under construction made yet another new all-time high:

The pace of construction for these multi-family units has barely slowed down at all:

Historically you have needed about a -10% decline in housing under construction before a recession actually began. Once again in July, the final domino - multi-family units under construction - did not fall. I suspect no recession will begin until it does.

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