For all of 2019, BuildFax Housing Health Reports have revealed that single-family housing authorizations – what some consider a key indicator of historic recessions – have been decreasing.
Put simply, construction activity seems to be slowing down each month. Most recently, single-family housing authorizations decreased by 1.06% from July to August. That puts it at a 4.17% decline year over year, making for the third straight quarter of declines in 2019, according to the latest data released by BuildFax.
“As declines across key economic indicators hint at an economic slump, talk of a potential recession has amplified. It’s difficult to definitively say whether one is imminent. However, heightened tensions surrounding a probable recession has put increased scrutiny on the declining single-family housing authorization index, which has a high correlation to historical recessions,” said BuildFax CEO Holly Tachovsky. “The potential shift in residential housing towards a buyer’s market is one example of the market reacting in a tangible way to these declines.”
While BuildFax cites the declines as an indication of a looming recession, there are other data points in the company’s report the seemingly counteract that.
Existing housing maintenance – what BuildFax refers to as “a gauge of consumer confidence” – is rising consistently again after six months of decreasing activity. According to the report, existing housing maintenance volume increased by 1% year over year, and existing housing remodel volume saw a 1.16% year-over-year increase.
“This suggests that U.S. homeowners have enough confidence in the market to embark on substantial property updates,” Tachovsky said. “This is good to see, especially amidst this year’s severe weather events, as maintenance activity improves the residential housing stock – an asset class that’s valued at more than $35 trillion.”