What Are Housing Starts?
Let me explain what housing starts really mean. The term housing starts points to the beginning of construction on a new residential housing unit.
Since new housing is a major capital investment that drives extra consumer spending on things like appliances and furniture, it's a critical economic indicator that financial market participants keep a close eye on.
The U.S. Census Bureau puts out estimates of U.S. housing starts on the 12th business day of each month, based on a survey of homebuilders that's partly funded by the U.S. Department of Housing and Urban Development. This New Residential Construction report also covers housing completions and includes a count of building permits from a separate survey of building permit offices.
Key Takeaways on Housing Starts
You need to know that housing starts measure new residential construction and stand as a key economic indicator. A housing start gets counted right when groundbreaking starts, and every unit in a multi-family project counts as its own separate start.
We compare seasonally adjusted data for the latest month to previous months. Monthly changes can swing wildly, but the longer-term trend follows a vital sector for consumer spending and the overall economy.
Understanding Housing Starts
Housing is a core part of the U.S. economy, essential for banking, construction, and real estate industries. The sector's health affects employment and commodity prices like lumber and copper.
Housing starts show how willing builders are to invest in new projects, which hinges on their views of housing demand, so trends in starts can reveal risk appetite and consumer sentiment.
Given that housing starts vary seasonally in different U.S. regions, the monthly report's headline number is a seasonally adjusted annual rate—it tweaks the monthly total for seasonal factors and projects an annual rate at that pace.
Short-term weather issues like storms or cold weather can disrupt this volatile data. The Census Bureau points out that month-to-month changes in seasonally adjusted data can be uneven, and it typically takes six months to pin down the underlying rate for housing starts.
The report divides national housing starts data into four U.S. regions: Northeast, Midwest, South, and West.
What Counts as a Housing Start
A housing start means the groundbreaking or excavation for a home's foundation or footing. The monthly data splits into three categories: single-family homes, multi-family housing of two to four units, and multi-family housing with five or more units, like apartment buildings.
Data for single-family homes and multi-family with five or more units comes both seasonally adjusted and unadjusted, while two-to-four unit multi-family data is only unadjusted.
Each unit in multi-family housing counts separately, so starting construction on a 25-unit apartment building registers as 25 new multi-family housing starts.
The New Residential Construction report covers starts for privately-owned housing, including units built by private developers for sale to local public housing authorities once completed. These statistics exclude group quarters like dormitories and rooming houses.
Fast Fact
Remember, each unit in an apartment building counts as a separate housing start.
How the Housing Starts Data Is Gathered
The Census Bureau estimates housing starts from a representative sample of building permits issued by selected local permitting offices, then follows those projects through to completion and sale.
The survey includes all housing starts with five or more units, but only samples about 2% of nationwide starts for housing with one to four units.
To handle sampling errors and other issues, the monthly report includes error margins with 90% confidence intervals for month-to-month and year-over-year changes.
For instance, the initial report of a 1.7% drop in single-family housing starts in March 2022 from the previous month had a 90% confidence interval of plus or minus 12.3%, while the 4.4% decline from a year earlier had an error margin of 8.3%.
The Bottom Line
Housing drives a key sector of the U.S. economy, and the monthly housing starts report is a closely monitored gauge of its health. The month-to-month figures are volatile and come with large error margins, so you need months of data to spot the real trend.
Warning
Mortgage lending discrimination is illegal. If you believe you've faced discrimination based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, take action. One step is to file a report with the Consumer Financial Protection Bureau or the U.S. Department of Housing and Urban Development (HUD).
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