What are housing starts?
Housing starts are the number of new residential construction projects that have started in a given month. The report on new residential construction, commonly known as “housing starts”, is considered to be an essential indicator of economic strength. Statistics on housing starts are published around the 17th of each month by the United States Department of Commerce. The report includes data on building permits, housing starts and housing completion. Surveys of home builders nationwide are used to compile the data.
Explanations of housing starts
Investors and analysts look at housing starts figures each month, comparing them with data from previous months and year-over-year periods. Since housing starts can be significantly affected by weather conditions, the figures are also presented as seasonally adjusted and smoothed using statistical formulas. Data on housing starts are often revised to reflect the most recent assessments. Housing is a key part of the US economy, which has an effect on related industries, such as banking, mortgage, commodities, employment, construction, manufacturing and real estate. In a strong economy, people are more likely to buy new homes; conversely, in a weak economy, people are less likely to buy new homes.
What housing starts can reveal about the economy
The types of housing starts reported may reveal nuances in the evolution of the economy. Although the total number of housing starts can give a general idea of the economic orientation, understanding the types of houses under construction can give a more personalized assessment.
For example, if housing starts show a decrease in the number of new single-family dwellings in favor of multi-family starts, this could indicate that a shortage of supply is looming for single-family homes. This can lead to price increases for this segment, which makes these units more advantageous. It could also indicate that the general public is avoiding more expensive homes in favor of finding more affordable multi-family units. In addition, housing indicators include reports on apartment construction, which can also reveal details about stocks in this segment, and whether previous construction was higher than what the market needed or not.
Speculative builders may have started building multi-storey apartment buildings in urban areas, for example, anticipating some demand for apartment space in a given city. If there is a drop in demand for such housing, construction companies could naturally withdraw from construction and development plans in cities.
Changes in housing demands can come from a variety of factors. Salary changes and job changes can directly affect the feasibility of finding new housing.