The inversion of the yield curve — when long-term interest rates drop below short-term interest rates — this week was seen as a warning sign to many that another recession was looming. But Friday morning’s housing start data means we shouldn’t sound the alarms just yet, according to Odeta Kushi, the deputy chief economist at First American.

“There are many factors to consider beyond the inversion of the yield curve when determining recession risk,” Kushi said. “Single-family housing starts have been a more reliable indicator because they are a reflection of both homebuilder and consumer confidence.”

While privately owned housing starts continued their month-to-month declines in July, dropping 4 percent from June, according to the U.S. Census Bureau and U.S. Housing and Urban Development. Housing starts increased 0.6 percent year-over-year and most of the monthly declines were in the multifamily sector with single-family housing starts increasing 1.9 percent month-over-month.

“While in recent months housing starts have slowed, July’s 1.9 percent year-over-year gain in single-family housing starts demonstrates homebuilders remain confident,” Kushi said.

In the past 40 years, a year-over-year decline of 20 percent or more in single-family housing starts has preceded all but one — in 2001 — of the five recessions. Conversely, the yield curve has inverted 36 times since over the last 40 years, with only five recessions.

“Homebuilders are reluctant to break ground on new projects if they fear the economy may slump later,” Kushi said. “Likewise, consumers are hesitant to make a large investment if they fear losing their jobs.”

New housing authorized by permits are up 8.4 percent month-over-month and 1.5 percent year-over-year. Housing completions are also up 7.2 percent month-over-month and 6.3 percent year-over-year.

Email Patrick Kearns

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription