Homes under construction has surpassed housing starts over the last 10 months (since May 2022). There are currently
1691 units under construction in the US which is higher than the peak of 1,626 units achieved in March 1973.
This makes a lot of sense. When interest rates were low, builders sold a lot of homes but because of supply constraints/shortages of labour, the construction of these units were backlogged. When these homes get completed, which I suspect will mostly happen by the second half of the year, then homes under construction will naturally fall. How do I know this? Well, you just have to look at the current housing starts which currently is at 1450 units. This is a 14% difference from the number of homes currently in construction which is telling me that people will have to lose their jobs unless housing starts improves significantly. Jerome Powell is not going to blink. His mandate is to kill inflation and this is what he is set out to do. The recession is going to start when the vast majority of these homes under construction get completed.
Final verdict:
The housing market is going to lead the economy into a recession. In addition, many regional banks that hold commercial mortgage backed real estate loans are going to see an increase in default rates on these loans. The "work from home" environment coupled with a liquidity crisis and higher interest rates is a perfect storm ready to unfold.