Single Family Housing Transactions Have Crashed, But When Will That Matter?

Housing Construction vs Private Fixed Investment Notes

• It’s more than a bit unusual to plot thousands of units and billions of dollars on the same axis, but the chart conveys the important ideas. 
• Single family construction is far more important than total units under construction.
• Private Residential Fixed Investment, a component of GDP follows single family with a lag that might be quite long.

Private Residential Housing Units vs Private Residential Fixed Investment 

The second chart is the same as the first except that I added a line for multi-family, 5 or more units in a single building.

Total units under construction is still rising but private residential fixed construction is falling. Why is that?https://platform.twitter.com/embed/Tweet.html?dnt=false&embedId=twitter-widget-0&features=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%3D&frame=false&hideCard=false&hideThread=false&id=1633267467882471425&lang=en&origin=https%3A%2F%2Fmishtalk.com%2Feconomics%2Fsingle-family-housing-transactions-have-crashed-but-when-will-that-matter&sessionId=77fd330e9444365aeeb8439de19108fb5b88c3d7&siteScreenName=%40teslapodcast&theme=light&widgetsVersion=aaf4084522e3a%3A1674595607486&width=550px

My charts above are quarterly charts. Let’s hone in on employment, the subject of my previous post, Idea of the Day: Construction Employment Saved the Economy But That’s Now Ending

I created some new charts to better highlight what’s happening.

Private Residential Housing vs Residential Building Employees Long Term

Once again I have an unusual left axis (thousands of units or thousands of employees), but again it ties everything together nicely.

The lags are considerable. Starts turn lower first while total units under construction flattens. Single family units under construction lags starts, and residential building employment tends to lag everything. 

The dashed blue lines are examples of the preceding paragraph. 

I prefer to use starts rather than permits because starts eventually gets finished, but permits may not result in starts for very long periods at turns. 

Private Residential Housing vs Residential Building Employees Short Term

With total housing units flatlining and single family units under construction falling pretty hard, it’s likely that residential housing employment is poised to fall. 

The rate of decline in employment will depend on how fast the units under construction finish.