Another indicator that economists pay attention to when looking out for a recession? Housing starts.

​When new residential construction is down and stays down, that can signal a slowdown.

​Now that’s not a guaranteed predictor. ​But new building permits last month declined 6.8% compared to February of 2024. And builder confidence for new single-family homes is the lowest it’s been in seven months. 

That’s partly an interest rate problem, as we’ve talked about on this show before. But increasingly, it’s also a tariff problem.

And here in Southern California, where there are a lot of people looking for building permits after the recent wildfires, that problem is hitting even more people than it normally would.

The tariffs are just piling onto a bigger, longer-lasting problem: homeowners don’t have good reasons to sell. 

“Why do that? You know, I’ve got a nice low interest rate. I got nice monthly payments, that’s mainly the force behind that,” said Michael Bellaman, CEO of Associated Builders and Contractors. 

Bellaman said the tariffs themselves haven’t had a major impact yet. It’s the price uncertainty that’s mucking with the industry.

“Developers or construction project owners that are thinking about pulling the trigger for a project are saying, ‘You know what, let’s wait until this settles down,’” said Bellaman.  

Just the fear of increasing prices has already started to cause problems for architect Dan Brunn, who’s working on rebuilding homes after LA’s wildfires. 

On a renovation job he’s got now, “The contractor has already basically announced that they will need to have the client buy all of these appliances today even though they won’t be brought to the site in six months,” Brunn said, because suppliers are trying to lock in prices before they go up. 

Fine, except now that stove is sitting in a warehouse, gathering dust, waiting to go in a home that isn’t built yet. 

“You can’t have products just sitting around and not being utilized and hooked up, and your warranty starts from that day, too,” said Brunn. 

A lot of construction basics could see new price pressures, said Chief Economist Ken Simonson with the Associated General Contractors of America.

“The industry relies on a lot of Canadian lumber, on imported steel, aluminum and copper,” which Simonson said is in the appliances, the electronics, the furniture, the lighting fixtures. And then there’s specialty products.

“Decorative tile comes in part from Italy and from Spain,” said Simonson. “And so if we see tariffs on the EU, those might hit those particular products.”

Architect Dan Brunn also said the alternative he keeps hearing — to buy American instead — won’t help much. Because even if, say, a stove is assembled here, he said the components inside come from overseas and face the same tariffs anyway.