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Economics - Home Sales


Release Date:
On or around the 17th of each month
Release Time:
8:30am Eastern Standard Time
Coverage:
Previous month\'s data
Released By:
U.S. Census Bureau
Latest Release:
http://www.census.gov/const/www/newresconstindex.html


Background
The New Residential Construction Report, more commonly known as "housing starts" on Wall Street, is a monthly report issued by the U.S. Census Bureau jointly with the U.S. Department of Housing and Urban Development (HUD). The data is derived from surveys of homebuilders nationwide, and three metrics are provided: housing starts, building permits and housing completions. A housing start is defined as beginning the foundation of the home itself, while building permits are counted as of when they are granted.
Both building permits and housing starts will be shown as a percentage change from the prior month and year-over-year period. In addition, both data sets are divided geographically into four regions: Northeast, Midwest, South and West. This helps to reflect the vast differences in real estate markets in different areas of the country. On the national aggregates, the data will be segmented between single-family and multiple-unit housing, and all information is presented with and without seasonal adjustment.
Housing starts and building permits are both considered leading indicators, and building permit figures are used to calculate the Conference Board's U.S. Leading Index. Construction growth usually picks up at the beginning of the business cycle (the Leading Indicator Index is used to identify business cycle patterns in the economy, and is used by the Federal Open Market Committee (FOMC) during policy meetings).
What It Means for You
The housing market may show the first signs of stalling following a rate hike by the Federal Reserve. This is because rising mortgage rates may be enough to convince homebuilders to slow down on new home starts. For traders looking to evaluate the real estate market, housing starts should be looked at in conjunction with existing home sales, the rental element of the Consumer Price Index and the Housing Price Index (also available from the Census Bureau). (For related reading, see Investing In Real Estate.)
According to the Census Bureau, "it may take four months to establish an underlying trend for building permit authorizations, five months for total starts and six months for total completions", so smart traders will look more closely at the forming patterns to see through often-volatile month to month results.
Strengths
-Very forward-looking, especially building permits; a good gauge for future real estate supply levels
-Often used to identify business cycle pivot points
-Sample size covers approximately 95% of all residential construction in the U.S.

Weaknesses
-No differentiation between size and quality of homes being initiated, only the nominal amount
-Only focuses on one component of the economy

Durable Goods


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RELATED TERMS
  1. Housing Starts

    The number of new residential construction projects that have ...
  2. Building Permits

    A type of authorization that must be granted by a government ...
  3. Bureau of Census

    A division of the federal government of the United States Bureau ...
  4. Construction Spending

    An economic indicator that measures the amount of spending towards ...
  5. Housing Unit

    One of a house, apartment, mobile home, group of rooms or single ...
  6. New Home Sales

    An economic indicator that measures sales of newly built homes. ...
RELATED FAQS
  1. What's the difference between housing starts and building permits?

    Both housing starts and building permits are economic indicators used to assess the health of the housing market, but their ... Read Answer >>
  2. What economic indicators should an investor in the real estate sector consider?

    Find out about economic indicators and which indicators investors in the real estate sector should take into account before ... Read Answer >>
  3. Which has performed better historically, the stock market or real estate?

    Find out why stocks have historically performed better than real estate in U.S. history, why this makes sense, and why the ... Read Answer >>
  4. Is there a correlation between inflation and house prices?

    There is a correlation between inflation and house prices - in fact there are correlations between inflation and any good ... Read Answer >>
  5. How does a decline in housing prices affect the banking sector?

    Learn about the affects on banks when housing prices go down, including loan delinquency rates, mortgage foreclosures, and ... Read Answer >>
  6. What are the differences between investing in real estate and stocks?

    Invest in real estate by purchasing physical property or buildings, or invest in stocks by buying a claim to a company and ... Read Answer >>

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