In
2022,
many
recessionary
red
flags
popped
up.
However,
after

Nov.
9,
2022,
a
critical
recessionary
data
line
changed
as

mortgage
rates
fell,
new
home
sales
grew,
builders
bought
down
rates
and
the
cycle
moved
on.
You
could
see
this
in
the
builders’
confidence
data.

Last
year,
as
rates
rose

toward
8%,
the
builders’
confidence
fell,
and
then,
as
rates
fell,
their
confidence
rose
again.
The
most
recent


NAHB
survey
shows
builders’
confidence
has
stalled,
and
it
will
most
likely
head
lower
soon!
Why
has
this
happened?

The
10-year
yield
broke
a
key
support
line
last
week,
just
like
last
year,
and
it
wants
to
test
5%
again.
It’s
currently
at
4.65%.
This
means
mortgage
rates
are
higher
than
they’ve
been
all
year,
and,
as
I
talked
about

last
year
on

CNBC,
higher
mortgage
rates
are
never
good
thing
for
housing. 

I
haven’t
been
a
Fed
pivot
person
since
2022
—
I
don’t
think
the
Fed
will
pivot
until
the
labor
market
breaks.
I
recently
discussed
how
high
mortgage
rates
can
go
in
the

HousingWire
Daily
podcast.

So,
how
should
we
approach
the
housing
starts
data
to
understand
when
a
job
loss
recession
will
happen?
Follow
this
journey
with
me.

As
we
can
see
below,
recessions
traditionally
don’t
start
until
residential
construction
jobs
are
lost.
This
isn’t
just
people
who
work
in
apartments
and
single-family
homes,
as
remodeling
employment
is
also
high
here.
As
we
can
see
below,
we
haven’t
shed
residential
construction
jobs
yet,
and
we
haven’t
gone
into
a
job
loss
recession
either.
Also,
remember
we
are
an
aging
society,
and
baby
boomers
leave
the
workforce
each
month.
Many
companies
are
mindful
of
keeping
the
right
amount
of
labor
in
their
workforce.

Residential
workers
fall
before
the
recession
as
higher
rates
bite.

Now,
let’s
look
at
housing
permit
data.
As
we
can
see
in
the
chart
below,
5-unit
permit
data
is
already
at
the
low
levels
of
the
COVID-19
recession.
As
crazy
as
this
sounds,
we
also
have
a
shot
at
having
this
data
line
reach
Great
Financial
Recession
lows.

Since
January
2023,
as
5-unit
permits
have
fallen,
single-family
permits
have
risen.
But
that’s
not
what
we
see
in
this
report:
single-family
permits
fell
in
this
report.
As
we
can
see
below,
when
both
data
lines
fall
together
over
time,
it
eventually
leads
to
construction
workers
losing
their
jobs
and
jobless
claims
rising,
which
is
how
each
recession
has
worked. 

We
are
not
in
the
danger
zone
yet,
as
we
have
a
hefty
backlog
of
construction
work
that
needs
to
be
finished.
However,
I
am
creating
a
pathway
for
you
to
walk
to
in
the
future.

*Notice
how
permits
for
single-family
and
five
units
tend
to
fall
together
before
the
recession.

Housing
starts
are
growing
yearly,
and
5-unit
starts
are
collapsing.
In
2021,
I
wrote

a
critical
piece
stating
that
once
mortgage
rates
rise
and
builders
start
to
make
less
money
building,
they
will
fold
like
they
always
do.
This
is
an
excellent
example
of
why
I
say
builders
aren’t
the
March
of
Dimes.

A
huge
gap
between
housing
starts
and
5-unit
starts
has
been
forming.

I
wanted
to
keep
this
housing
starts
report
straightforward
today
to
get
people
to
look
ahead
in
the
future
and
connect
the
dots,
because
the

Fed
will
only
pivot
once
the
labor
market
breaks,
when
they
see
jobless
claims
rising.
That,
in
turn,
will
lead
to
lower
mortgage
rates
as
the
bond
market
sniffs
out
accurate
recessionary
data
and
takes
yields
and
mortgage
rates
lower.
Until
then,
mortgage
rates
and
bond
yields
will
be
elevated.