What's the difference between housing starts and building permits?

By Brent Radcliffe AAA
A:

Housing starts and building permits are economic indicators used to determine the health of the housing sector. In the United States, housing start and building permit data is released by the Census Bureau, and is estimated from the Survey of Construction (SOC) and the Building Permits Survey (BPS). Data is released each month in the New Residential Construction report.

The building permit statistic is an estimate of the number of new housing units that have been issued a permit during a given month. The Census Bureau collects permit data by sending a survey to permitting offices.

The housing starts statistic indicates the number of housing units that began construction during a given time period. Field representatives of the Census Bureau sample individual permits from permit offices, and check with permit holders to determine if construction has begun.

Economists look at building permits and housing starts to determine how well the economy is performing. If more building permits are being issued economists may assume that more investment is being allocated to the housing market, which traditionally makes up 5% of the U.S. economy. A decline in the number of housing starts relative to building permits may indicate that planned construction is being put off, possibly because of unfavorable economic conditions.

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