Housing starts

RECENT NEWS
SeekingAlpha  May 17  Comment 
Clusterstock  May 17  Comment 
Housing starts rose more than expected, while building permits disappointed. Housing starts surged by 6.6% in April to 1.172 million.  Economists were expecting housing starts to rise  3.3% to 1.125 million. Meanwhile, building permits...
Wall Street Journal  May 17  Comment 
Yahoo  Apr 25  Comment 
Local governments may be hitting up developers for revenues, Macquarie says.
newratings.com  Apr 19  Comment 
WASHINGTON (dpa-AFX) - After reporting a sharp increase in new residential construction in the previous month, the Commerce Department released a report on Tuesday showing that U.S. housing starts pulled back by much more than expected in...
Clusterstock  Apr 19  Comment 
Housing starts and building permits fell more than expected in March, according to the Census Bureau. Housing starts fell 8.8% at a seasonally adjusted rate of 1.089 million. And, building permits fell 7.7% at an annualized pace of...




 
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Housing starts is a closely-watched indicator of the health of the home construction industry. Homebuilding is a major component of the overall economy due to all its size and its linkages with finance, basic materials, home furnishings and appliances, employment and overall growth.

Source

The Census Bureau, together with the Department of Housing and Urban Development (HUD) jointly report on new residential construction each month. The report has three components: Building permits, housing starts and housing completions. See [[1]]

Image:starts.png


Discussion

  • Housing starts is a measure of the number of privately-owned new housing units that began construction in the reporting month. It is usually reported at the seasonally adjusted annual rate (SAAR). The most recent peak in starts was 1.8 million units in November 2006. In February of 2008 the SAAR was 1,065,000. (These figures include all housing types except mobile homes/manufactured housing.)
  • Before a housing unit is built a building permit is issued. In a sense, building permits are a leading indicator of how many starts there will be in a month or two. In February 2008 the SAAR for permitted units was 978,000, some 7.8% below the revised January rate.
  • Housing completions tells us how many of the homes that were permitted and started have been finished. This measure doesn’t get much attention by the media or most investors. As of February 2008 completions were at the SAAR of 1,208,000, which is about 8.8% below January and 26% below the rate one year earlier.


Note

In general, and for a variety of reasons, starts are usually about 2.5% less than permits and completions are about 4.0% less than starts. The greatest variability is in the multifamily sector, where starts have been 22.5% less than permits (mostly due to reclassification to single-family) and completions have been 7.5% less than starts.

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