Housing Starts

Definition

Housing Starts represent the number of new residential construction projects that have commenced within a given time frame, typically expressed monthly or annually. It serves as an essential economic indicator, reflecting the health and direction of the real estate market and the broader economy.

Examples

Monthly Decline: Last month, housing starts were 20% lower compared to the same month a year ago. The decrease was attributed to higher mortgage rates, which reduced the demand for new housing.
Annual Rise: In 2021, the United States experienced a significant increase in housing starts, with a 15% rise compared to 2020, driven by increased demand for suburban homes amid the COVID-19 pandemic.
Regional Variation: The Northeast region saw a substantial slowdown in housing starts due to harsh winter conditions, whereas the Southern region experienced a surge owing to milder weather and growing populations.

Frequently Asked Questions (FAQs)

Q1: What factors influence housing starts?
A1: Several factors influence housing starts, including mortgage interest rates, economic conditions, consumer confidence, availability of building materials, and regional demand for housing.

Q2: Why are housing starts considered a critical economic indicator?
A2: Housing starts are closely monitored because they provide insights into construction activity, housing demand, and broader economic trends. They can signal potential changes in employment, GDP growth, and consumer spending.

Q3: How is the housing starts data collected?
A3: The data is typically gathered through surveys of building permit offices and construction companies, compiled and published by government agencies such as the U.S. Census Bureau.

Q4: How often is housing starts data released?
A4: Housing starts data is generally released on a monthly basis, reflecting the number of new residential construction projects that started in the previous month.

Q5: Can housing starts predict future economic performance?
A5: Yes, housing starts can serve as a leading indicator of future economic performance because changes in construction activity can influence broader economic conditions, including job creation and spending on related goods and services.

Building Permits: Authorization from local governmental agencies that allows the construction of a new building or significant alterations to existing structures.
Construction Spending: The total amount of money spent on new construction projects and improvements to existing properties over a specified period.
New Home Sales: The sale of new single-family homes during a specified period, another important economic indicator often analyzed in conjunction with housing starts.
Mortgage Rates: The interest rates charged on a mortgage loan, which can significantly influence housing affordability and demand.

Online Resources

References

“Monthly New Residential Construction, March 2023.” U.S. Census Bureau. Link.
“Housing Starts: Definition, Economic Impact,” Investopedia. Link

Suggested Books for Further Studies

“Housing Markets and Housing Institutions: An International Comparison” by Peter Newman
“Real Estate Market Analysis: Methods and Applications” by John Ratcliffe, Michael Stubbs, Miles Keeping
“Residential Construction Academy: Principles and Practices” by Floyd Vogt

Real Estate Basics: Housing Starts Fundamentals Quiz

### What do housing starts represent? - [x] The number of new residential construction projects that have begun - [ ] The completion of new residential homes - [ ] The sale of all new residential properties within a given period - [ ] The number of building permits issued > **Explanation:** Housing starts refer to the number of new residential construction projects that have begun, offering insights into construction activity and economic conditions. ### How often is housing starts data typically released? - [ ] Annually - [ ] Bi-annually - [x] Monthly - [ ] Quarterly > **Explanation:** Housing starts data is typically released on a monthly basis, providing regular updates on new residential construction activity. ### What are some factors that influence housing starts? - [ ] Consumer confidence - [ ] Mortgage interest rates - [ ] Availability of building materials - [x] All of the above > **Explanation:** Housing starts are influenced by several factors such as consumer confidence, mortgage interest rates, and the availability of building materials, among others. ### Which US government agency typically collects and publishes housing starts data? - [ ] Federal Reserve - [ ] Department of Housing and Urban Development (HUD) - [x] U.S. Census Bureau - [ ] Bureau of Economic Analysis (BEA) > **Explanation:** The U.S. Census Bureau is responsible for collecting and publishing housing starts data, providing valuable insights into the real estate market. ### Why are housing starts considered a leading economic indicator? - [ ] They reflect public sentiment. - [ ] They indicate fiscal policy changes. - [ ] They influence stock market fluctuations. - [x] They provide early signals of economic performance. > **Explanation:** Housing starts are a leading economic indicator as they provide early signals of future economic performance through construction activity, job creation, and consumer demand. ### Can housing starts directly influence employment rates? - [x] Yes, because they lead to job creation in construction and related industries - [ ] No, they have no correlation with employment rates - [ ] Yes, but only in manufacturing sectors - [ ] No, they solely impact monetary policy > **Explanation:** Housing starts can greatly influence employment rates by generating jobs in the construction industry and related sectors such as materials supply and real estate services. ### How do high mortgage rates typically affect housing starts? - [x] They often lead to a decline in housing starts due to reduced affordability - [ ] They result in an increase in housing starts due to higher demand - [ ] They have no impact on housing starts - [ ] They cause a shift from urban to rural housing starts > **Explanation:** High mortgage rates often lead to a decline in housing starts because higher borrowing costs can reduce the affordability of new homes and dampen demand. ### How can weather conditions affect housing starts? - [x] Adverse weather can slow down or halt construction activities - [ ] Weather has no impact on housing starts - [ ] Good weather conditions always result in declining housing starts - [ ] Weather variability has minimal influence on housing starts > **Explanation:** Adverse weather conditions, such as harsh winters or excessive rain, can significantly slow down or halt construction activities, thus affecting housing starts. ### Which region in the US might see a slowdown in housing starts due to harsh winter conditions? - [ ] Southern region - [x] Northeast region - [ ] Western region - [ ] Midwestern region > **Explanation:** The Northeast region is likely to experience a slowdown in housing starts during harsh winter conditions, impacting construction activities. ### What term describes the authorization needed to begin construction on a new residential project? - [ ] Housing Starts - [x] Building Permits - [ ] Construction Spending - [ ] New Home Sales > **Explanation:** Building permits are required as authorization to begin construction on a new residential project. They are a precursor to housing starts data.