The Fed Says This Indicator Signals a Coming Recession. Did It Just Start Flashing Red?

The May housing data raise caution about recession signals, though context matters. U.S. housing starts fell 15.4% month-over-month in May to a 1.18 million annualized pace, the lowest since 2020, after April was revised down to 1.32 million. Multifamily starts collapsed 40.2% to 284,000, the lowest since November 2024, while single-family starts eased 1.9% to 882,000. Factors behind the slide include higher financing costs, roughly 10% annualized gains in construction inputs, tighter lending standards, and a flood of newly completed units entering the market. The data require nuance before signaling recession.