In a machine learning algorithm designed by Moody's to predict recessions, aggregate building permits (single-family and multifamily) emerged as the single most important variable. A decline in permits is a powerful signal of elevated recession risk for the entire economy.
The BLS assumed 0% October inflation for 88% of the CPI basket due to the government shutdown. This creates a false signal of rapidly cooling inflation and will distort year-over-year data for the next 12 months, rendering the report effectively "junk."
Existing homeowners have resisted price cuts due to low mortgage rates, but they will eventually face the same market realities builders are addressing now. This delayed "price discovery" is expected to cause a 1-2% nationwide decline in resale home prices in 2026.
The significant drop-off in population size with Gen Z and Gen Alpha will lead to a sharp decline in household formation. This demographic shift is projected to cause a 25% peak-to-trough reduction in single-family home building by the early-to-mid 2030s.
While the overall housing market is weak, specific segments are showing strength. Custom home building, serving wealthier buyers less sensitive to interest rates, is performing well. Townhouse construction also remains strong, meeting demand for walkable, medium-density housing.
While one-third of construction workers are non-native born, restrictive immigration policy's impact is currently muted by a cyclical decline in building. This temporary relief masks a structural labor shortage that will become a major constraint as the market recovers in 2026-2027.
The number of 25-34 year olds living with parents has doubled from 10% to 20% since 2000. This represents a significant "housing deficit" of unformed households, which will drive strong demand for new housing as soon as affordability improves.
To maintain sales volume, two-thirds of builders are using incentives, with many cutting prices outright. This has led to a rare market inversion where the median new home price has fallen below the median resale price, a phenomenon seen only a few times since the 1940s.