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What Is Affecting the Health of Housing?

tariffSingle-family housing authorizations, maintenance, and remodeling volumes have decreased, according to the BuildFax Housing Health Report which found declines in all three categories for the second consecutive month in December.

While single-family housing authorizations decreased by 3.76 percent year over year, maintenance volumes for existing homes declined 10.71 percent over the same period. The remodel volume of existing homes also dipped by 15.64 percent year over year, according to the report.

However, in a nod to 2018's high material and labor costs remodel spend, a consistently volatile subsection, increased 5.97 percent in December. These higher costs resulted from increased tariffs and the effects of recent natural disasters, the report indicated.

The U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD) publish a joint report on new residential construction every month. But the report has been delayed this month due to the government shutdown.

If the current trend of declines across these three categories persists, the report noted that the probability of recession could double between 2019 and 2020, the report said.

"The potential for an economic downturn has been highly discussed over the past few months as more signals of a recession come into alignment," said Holly Tachovsky, CEO, BuildFax. "While this is only the second consecutive month of declining indicators, this shift is in stark contrast to the white-hot housing market that the U.S. has experienced since 2013."

According to the report, single-family housing authorizations are among the earliest and most predictive indicators of a recession and can provide a leading indicator of the health of the economy. Looking at historical data, the report found that U.S. housing authorization activity had one of the highest correlations with each economic downturn between 1961 and 2018.

"Under current conditions, we anticipate single-family housing authorizations to be a must-watch indicator in 2019 and as we move into 2020. However, more than a few critical economic factors must align before a recession is imminent," said Jonathan Kanarek, COO BuildFax.

Click here to read the full report.

About Author: Radhika Ojha

Radhika Ojha, Online Editor at the Five Star Institute, is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in Accounting and Marketing and an M.A. in Mass Communication. Upon completion of her master’s degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Dallas, Texas. You can contact her at Radhika.Ojha@theMReport.com.
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