Tuesday, July 3, 2018

May residential construction: decelerating trend continues

 - by New Deal democrat

May residential construction was reported yesterday. This series lags permits, starts, and new home sales, but has the virtue of being the least volatile of any housing measure. So let's take an updated look.

The first thing to notice is that the positive trend is continuing:

That being said, there has been noticeable deceleration of that positive trend since the beginning of 2017.

This becomes apparent when we look at the data YoY (blue), and compare with single family permits (red):

Note the tight fit, but that construction spending is much less volatile. Further, residential spending turning negative YoY has been indicative of at very least a slowdown (1994) if not outright recession.

Here is a close-up of the last 6 years:

Based on continued positivity of permits, I'm not expecting residential construction to decelerate further over the near term, but a sideways trend is more likely.