Don’t look now, but the housing sector may have narrowly avoided a recession this summer.

That is the initial conclusion of economists with First American Financial Corp. who found that four of the company’s eight signs of a housing recession were flashing red in May and June, until the industry started showing signs of recovering in July.

“While the housing market flirted with a recession in May and June, it didn’t fully commit, and July is already showing signs of a comeback,” said Odeta Kushi, First American’s deputy chief economist.

Because there is no agreed-upon definition of a housing recession, First American has developed its own. The company’s comprehensive model is based on eight different economic indicators, including existing home sales, which broke a four-month downward trend in July, increasing by 1.3% month over month. Also offering hope was the total number of employees in residential building construction, which ticked lower between June and July before rising higher in August, according to data from the Federal Reserve Bank of St. Louis (FRED).

A key indicator that didn’t improve was the number of single-family housing starts, which has been on a downward slide since February. Between April and July of this year, housing starts fell from an already depressed 1.04 million units to 851,000 units, as per FRED.

Other indicators in the model include the average hourly earnings of non-supervisory construction workers; the total number of employees in real estate rental and leasing; private residential fixed investment; personal consumption expenditures on housing and utilities; and the company’s Real House Price Index, which is a measure of affordability.

According to Kushi, if the moving average of the monthly growth rate of four of the eight indicators is negative for at least three consecutive months, it indicates a possible housing recession. But industry growth in July and August may help break the string of bad news.

Kushi notes that there is a common belief that the housing market is always the first to dive into an economic recession and the first to climb out. But she maintains that the old saying isn’t necessarily accurate. An examination of the history of economic and housing recessions by First American reveals a varied pattern in which housing sometimes takes the lead, but not always.

She argues that of the 10 distinct housing recessions they have tracked since 1970, six of them preceded an economic recession as determined by the National Bureau of Economic Research Business (NBER).

“The relationship between housing and economic recessions is complicated,” Kushi said. “But whether housing leads the economy or not, there is good news on the horizon. Mortgage rates fell in July and August, which improved affordability and eased the rate lock-in effect. While this rate drop has not yet spurred a significant rebound in housing activity, it provides a glimmer of optimism that the peak risk of a housing recession may be behind us.”