Meet the Author

Ed Nosal |

Senior Research Advisor

Ed Nosal was formerly a senior research advisor in the Research Department of the Federal Reserve Bank of Cleveland.

Meet the Author

Michael Shenk |

Research Assistant

Michael Shenk

Michael Shenk was formerly a research assistant in the Research Department of the Federal Reserve Bank of Cleveland. His work focused on international topics and housing-market indicators.


Economic Trends

Some Say Housing Numbers Encouraging

Ed Nosal and Michael Shenk

The housing permits series, which is less volatile than the housing starts series, tracks housing starts fairly closely. Both of these series—for single-family units as well as total units—reported sustained growth from late 2000 until the summer of 2005. After that, and continuing until recently, all of these series declined substantially. In 2006, permits for both single- and multi-unit structures showed no increase until December, and recent housing starts have not declined from their October numbers.

Most of the postwar recessions have been characterized by substantial declines in starts and permits. The most recent recession (2001) is a notable exception, in which starts and permits did not differ substantially from those observed the previous year. The recent numbers do not necessarily imply that the housing-market slide is over; however, many analysts believe that recent numbers are encouraging and that the housing market may cease to be a drag on economic activity by the end of 2007:IIQ.

Although residential investment has recently been rather weak, the other components of GDP have been relatively robust. To see this, we compare GDP growth with the same growth rate excluding residential investment. Note that for 2005:IQ, the growth rate for residential construction exceeded that of economic activity overall, whereas for 2006:IQ, it lagged the overall growth rate. General economic activity excluding residential construction registered a solid growth rate of 3.2 percent in 2006:IIIQ